Confidence remains range-bound, as dips in both current conditions and expectations halt rising optimism

The Conference Board Consumer Confidence Index (CBCCI) fell in February to 106.7, down from 110.9 in January, according to a report by the Conference Board.

Following three consecutive months of gain, February declined. January, originally revised downward, indicated a reading of 114.8. CBCCI suggests that “there was not a material breakout to the upside in confidence at the start of 2024.” A consumer assessment of current business and labor market conditions says the Present Situation Index fell to 147.2 in February, down from 154.9 in January. 

The Expectations Index, on the other hand, based on consumers’ short-term outlook for income, showed business and labor market confidence slipped to 79.8, down from 81.5 in January. 

An Expectations Index reading below 80 often signals recession ahead, according to the report.

“The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy,” said Dana Peterson, Chief Economist at The Conference Board. “The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000. 

Peterson says certain demographics were more greatly affected by waning confidence, and the U.S. political environment is big factor in confidence to buy.

“Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54,” she said. “February’s write-in responses revealed that while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months. But they are more concerned about the labor market situation and the US political environment.”

The report showed consumers’ views of both business conditions and the employment situation became less favorable in February, and for the next six months, as consumers stare at an uncertain future with the market, business outlook and labor market not looking promising.

“Furthermore, consumers’ assessments of their personal financial situation (a measure not included in calculating the Present Situation Index) also weakened,” according to the report.

As is the usually the case, this sort of outlook and lack of consumer confidence never fails to hit home, and with consumers less optimistic about family financial situations, the perceived likelihood of a US recession once again gained traction after falling over the previous three months, according to the report. 

“On a six-month basis, buying plans for autos, homes and big-ticket appliances dipped slightly,” reads the report. “The share of consumers planning a vacation over the next six months also declined. Expectations that interest rates will rise over the year ahead picked up slightly to 42.7%, which may have influenced buying plans. Meanwhile, consumers remained upbeat about stock prices over the year ahead.”

Consumers’ worry lessened slightly on the idea of inflation, however. The number of consumers concerned about rising inflation dropped to 5.25%, according to the report.

That number peaked at 7.9% in mid-2022 and has now fallen to its lowest level since March 2020 when it sat at 4.5% 

“This aligns with continued slowing in consumer price inflation in government reports and fewer complaints about food and energy prices in our survey,” according to the report.

Present Situation

Consumers’ assessment of current business conditions fell slightly in February.

  • 21.2% of consumers said business conditions were “good,” down slightly from 21.3% in January.
  • 17.1% said business conditions were “bad,” up from 15.3%.

Consumers’ appraisal of the labor market was also less positive in February.

  • 41.3% of consumers said jobs were “plentiful,” down from 42.7% in January.
  • 13.5% of consumers said jobs were “hard to get,” up from 11.0%.

Six Months Expectations:

Consumers were, on balance, more pessimistic about the short-term business conditions outlook in February.

  • 14.8% of consumers expect business conditions to improve, down from 16.7% in January.
  • 15.5% expect business conditions to worsen, down from 16.0%.

Consumers’ assessment of the short-term labor market outlook was more pessimistic in February.

  • 14.7% of consumers expect more jobs to be available, down from 15.6% in January.
  • 17.3% anticipate fewer jobs, up from 16.7%.

Consumers’ assessment of their short-term income prospects was, on balance, more optimistic in February.

  • 16.9% of consumers expect their incomes to increase, down from 17.1% in January.
  • 11.3% expect their incomes to decrease, down from 12.5%.

Assessment of Family Finances and Recession Risk

  • Consumers’ assessment of their Family’s Current Financial Situation was less positive in February.
  • Consumers were a bit less optimistic about their Family’s Financial Situation going forward.
  • Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months ticked up in February.

Image by Drazen Zigic on Freepik.

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