This will generate a lot of talk over the weekend.

Consumer confidence fell sharply in August due to the surge in gasoline prices. "Consumers have found it increasingly difficult to cope with the recent surge in gasoline prices as their required budget cutbacks escalated each time they filled their gas tank," according to Richard Curtin, the Director of the University of Michigan�s Surveys of Consumers. The unusually large August decline was widespread among all demographic groups and across all regions of the country. "Consumers anticipated higher inflation, higher interest rates, higher unemployment and a slower pace of economic growth during the year ahead," Curtin said. Although consumers did not anticipate a recession during the year ahead, they were more likely to expect an economic downturn sometime during the next five years.

The Index of Consumer Sentiment was 89.1 in the August 2005 survey, down from 96.5 in July and 95.9 in August of 2004. Only ten monthly surveys since 1978 recorded a larger one-month decline. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, fell to 76.9 in August, down from 85.5 in July and 88.2 in August 2004.

This is pre-Katrina, too. There is a good deal of thought out there that the current expansion is substantially buoyed by consumer and business confidence (see for example Business Week last week and today.) I think business more than consumer confidence will matter here, but there's no doubt at this point that consumer spending is being effected both by high gas prices and concern over the effects of Katrina.