Consumer confidence unexpectedly deteriorated in August. At minus 16.0, the flash estimate down from July's final minus 15.1 to register its first fall since March. However, the latest reading was only a 2-month low.

Recent levels have been well above the record minus 28.7 low posted last September but remain below the minus 11.5 long-run average. Indeed, retail sales have hardly grown so far this year and in June were still some 0.3 percent short of their mark a year ago. High inflation continues to squeeze real incomes and it is far from certain that the ECB's tightening cycle has run its course. For the time being, households are likely to remain cautious. More generally, today's update puts the both the Eurozone ECDI and ECDI-P at minus 14, showing that overall economic activity is running slightly short of market expectations.

Consumer confidence in August is expected to rise to minus 14.2 versus July's minus 15.1. This index has been steadily improving from record lows hit during the third quarter last year.

Compiled by the European Commission, the flash consumer confidence index is a broad measure of consumer sentiment. It is based on monthly surveys of consumers from all the European Union countries. The survey probes into consumers' perceptions towards their past and expected future financial conditions, as well as their feel of the economy overall. This includes topics such as major purchase intentions for the next year, savings intentions, home improvements, purchase of a car, prices and unemployment, among others. This flash measure is based on only partial data and provides an early guide to the final index, published around a week later as part of the full Economic Sentiment survey.

The pattern in consumer attitudes can be a major influence on stock and bond markets. Consumer spending drives the lion’s share of the economy, and if the consumer is not confident, she will not be willing to pull out the big bucks. This Consumer Confidence survey offers key confidence data across the European Union and the European Monetary Union. Consumer confidence impacts consumer spending which affects economic growth. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Since consumer spending accounts for such a large portion of the economy, the markets are always eager to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. The index is a broad measure of consumer confidence in the EU members and because of its coverage of all the EU countries it is highly regarded in the financial markets as a good indicator of the mood of consumers in each country. It is also normally a good indicator of quarterly GDP.

Data are available for each country and are aggregated for both the EMU and EU. The data are seasonally adjusted and defined as the difference (in percentage points of total answers) between positive and negative answers. The survey is conducted by the European Commission rather than Eurostat, the compiler of most other EMU data and measures consumer confidence on a scale of -100 to 100, with -100 indicating extreme lack of confidence, 100 indicating full confidence and 0 indicating a neutral opinion. The long-term average of the series is around -14.