WASHINGTON - Americans' confidence in the economy fell slightly in September from August, as many became less optimistic about hiring and pay increases over the next six months.
The Conference Board, a New York-based private research group, said Tuesday that its consumer confidence index dropped to 79.7 in September. That's down from August's reading of 81.8, which was slightly higher than previously estimated.
Consumers' confidence is closely watched because their spending accounts for 70 per cent of economic activity. The September reading was only slightly below June's reading of 82.1, the highest in 5 1/2 years.
While confidence has bounced back from the depths of the Great Recession, it has yet to regain a reading of 90 that typically coincides with a healthy economy.
In September, confidence fell on a dimmer outlook for the next few months. Lynn Franco, who oversees the survey, said that reflected concerns about the job market and wages. Consumers were actually more optimistic about present conditions.
"While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead," Franco said.
Amna Asaf, an economist at Capital Economics, said she believed that higher interest rates and lower stock prices contributed to the drop in confidence. But she noted that the survey concluded before last week's decision by the Federal Reserve to make no changes to its bond buying program. That decision sent stock prices up and interest rates down.
"We suspect that if the rebound in equity prices is sustained, along with the drop back in gasoline prices, confidence will rebound," she said.
On Tuesday, the average U.S. price for a gallon of gas was $3.46, according to AAA. That's eight cents cheaper than a month ago.
Recent data suggest economic growth may be slowing. Consumers spent more cautiously in August as their income barely grew. And higher interest rates are threatening to slow home sales, just as many markets are starting to recover.
The economy added 169,000 jobs in August, a modest gain but hardly enough to signal robust job growth. The U.S. unemployment rate fell to 7.3 per cent from 7.4 per cent. But the decline was mostly because more people stopped looking for work and were no longer counted as unemployed.
A weaker outlook for the rest of the year was a key reason the Federal Reserve decided last week to hold off on slowing its $85-billion-a-month in bond purchases. The bond purchases have kept longer-term interest rates low, making mortgages and other consumer loans more affordable. Many economists believe the Fed won't reduce the bond purchases until December at the earliest.
The economy has been held back this year by tax hikes, federal spending cuts and weaker global growth. It expanded at an annual rate of 2.5 per cent in the April-June quarter. But many economists say growth is slowing in the July-September quarter to an annual rate of 2 per cent or less.