The survey underscores the Federal Reserve's concern that risks to the six-year economic expansion have ``increased appreciably.'' Separate figures showed home prices suffered the biggest decline since at least 2001.
The New York-based Conference Board's index retreated to 105 this month, from 111.9 in July. Economists had forecast a reading of 104, according to a Bloomberg survey. Property values in 20 metropolitan areas decreased 3.5 percent in June from a year earlier, according to a report today by S&P/Case-Shiller.
``Consumers are obviously paying attention to what's going on and are a little worried by it,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``We are not expecting them to spend the way we thought they would a few months ago.''
Wachovia economists accurately predicted the confidence figure for this month, which declined from a near six-year high in July.
The housing recession is making it harder for Americans to tap home equity to finance the spending that accounts for 70 percent of the economy. A slowdown in hiring and slimmer pay raises may further weaken consumer sentiment and buying power.
``The things that are weighing on the consumer are getting pretty imposing,'' said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta, which last week announced job cuts. ``The equity that he's generated in his house over the years has been undercut'' by falling prices.
Stocks Weaken
Stocks declined for a second day after Merrill Lynch & Co. analysts said tighter credit markets will hurt bank earnings. The Dow Jones Industrial Average fell 280 points, or 2.1 percent, to 13,041.85. Treasury bills rose for the first time in six days.
Fed policy makers believed ``strains in financial markets'' jeopardized the expansion and further turmoil might require a response, according to the minutes of their Aug. 7 meeting issued today. Still, they put aside concerns about the rising cost of credit because they weren't convinced a slowdown in inflation would last.
The Case-Shiller report also showed that prices nationally dropped 3.2 percent in the second quarter from a year before. That compares with a 1.6 percent year-over-year drop the prior quarter.
Survey Details
The forecast drop in confidence reflected the median estimate in a Bloomberg survey of 73 economists from an originally reported July reading of 112.6. Estimates ranged from 99 to 108.
The Conference Board's measure of present conditions fell to 130.3 from 138.3 in July. The gauge of expectations for the next six months dropped to 88.2 from 94.4.
The share of consumers who said jobs are plentiful declined to 27.5 percent in August from 30 percent in July. The proportion of people who said jobs are hard to get increased.
The proportion of people who expect their incomes to rise over the next six months slipped to 19.1 percent from 19.2 percent. The share expecting more jobs fell to 13 percent from 13.8 percent.
The Conference Board's index tends to be more influenced than other sentiment gauges by consumer attitudes about the state of the labor market, economists said.
Other confidence measures have also showed declines.
Other Measures
The Reuters/University of Michigan preliminary index of consumer sentiment fell to its lowest in a year this month, it reported Aug. 17.
The ABC/Washington Post Consumer confidence index fell to minus 20 in the week ending Aug. 19, its lowest level since October 2005.
Plunging stock prices in the wake of a global credit crunch helped undermine consumer sentiment. The Standard & Poor's 500 index fell as much as 9.4 percent from its July 19 historic high to Aug. 15, when it started to recover.
The labor market, while resilient, is showing signs of weakening. Unemployment rose in July to 4.6 percent from 4.5 percent, still near the lowest in six years. Job growth slowed to 92,000 last month from 126,000 the prior month, down from last year's average of 189,000 a month. Growth in hourly earnings slowed to 3.9 percent in July from a year earlier, down from a nine-year high of 4.3 percent in December.
Stable Spending
Consumer spending growth will probably average a 2.5 percent pace in the second half of 2007, unchanged from the first six months, according to economists surveyed by Bloomberg News. That's down from a 3.4 percent pace in the last half of 2006.
The worst housing recession in 16 years is weakening consumer spending and costing jobs. Sales of previously owned homes fell in July to the lowest level in almost five years, while the glut of unsold homes rose to a 16-year high, the National Association of Realtors reported Aug. 27.
As global credit markets seized up on concerns over the pricing of funds backed by subprime mortgages, the Fed on Aug. 17 announced a surprise cut in the discount rate. The Fed said downside risks to growth had ``increased appreciably,'' in a statement interpreted by investors as signaling a move away from its tightening bias.
The credit crunch is costing jobs. San Diego-based Accredited Home Lenders Holding Co. on Aug. 22 said it would close more than half its operations and fire about 1,600 people.
Bank Firings
Two days before, Atlanta-based SunTrust Banks Inc. said it planned to cut about 2,400 employees this year as profit from retail and commercial banking declines.
Weaker home prices translate into slowing car sales, said Michael Jackson, chief executive officer of AutoNation Inc., the largest U.S. auto retailer, said in a July 26 interview from Fort Lauderdale, Florida.
``There is a direct link between housing and the distress it creates around consumers for big-ticket items,'' said Jackson.
Still, falling gasoline prices have provided consumers with some relief. Prices of regular unleaded gasoline fell from as high as $3.05 a gallon last month to $2.78 a gallon on Aug. 22. Prices are still up 30 percent from their lows for 2007 of $2.14 a gallon on Jan. 24.
