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For the second month in a row, the consumer confidence reading from the Conference Board plunged. For the month of September the reading came in at 99.8, nearly a 6 point drop from the revised level of 105.6 in August. Analysts had expected a reading of 104.5, so the number was far below expectations. The 99.8 consumer confidence marks the lowest level of confidence since November of 2005.

In order to come up with a confidence reading there are 5,000 households surveyed to ascertain the level of consumer confidence. The index consists of two subindexes, consumers appraisal of current economic conditions and their expectations of the future. Expectations account for 60% of the total index, while current conditions account for 40%. Interestingly, the reading for current conditions stood at 121.7 for current conditions, while the gauge of expectations came in at just 85.2. The future conditions index is generally seen as the best gauge for the future of consumer spending habits.

This report certainly raises concerns over the current and future state of the U.S. economy. Consumer spending accounts for more than 2/3 of the overall economy, so any significant slowdown in consumer spending habits will be extremely harmful to the overall economy.

A reading like this one can likely be attributed largely to the continued problems of the housing market and consumers concerns about that market. Additionally, if continued weakness is seen in the unemployment reports in the next couple of months consumers are likely to react quite negatively to those numbers.

Keep a close eye on future consumer spending numbers because the U.S. economy is depending on the consumers to hold up.

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