Insights and Resources
Consumer confidence falls in February amid a worsening outlook
REAL ECONOMY BLOG | February 28, 2023
American consumer confidence fell for the second straight month in February as expectations deteriorated to the lowest point since last July, the Conference Board reported on Tuesday.
The top-line confidence index dropped to 102.9 from 106.0 in the prior month, while the expectations index fell to 69.7 from 76.0.
The soft data on consumer strength adds to concerns that American consumers might not be as strong as seemed in January’s data on retail sales or spending.
Worsened expectations are most likely the result of rising gasoline prices, a rebound in inflation and coming rate hikes that could push the economy toward a hard landing.
That means the chance of the much-discussed no landing scenario, where inflation is not contained and the economy continues to grow, is getting slimmer.
Consumers remain resilient but we should not expect robust growth to persist as long as the Federal Reserve is determined to restore price stability.
Despite that, survey respondents continued to report that jobs remain abundant with the labor differential index rising to its highest level since last April at 41.5.
Given the strong correlation between the labor differential measure and the unemployment rate and job gains, we might expect another solid jobs report for February, which will come out next week.
Falling confidence leads to reduced plans for buying big-ticket items like automobiles, homes and major appliances. All indicators for spending plans in the next six months fell in February.
Consumers also plan to travel less the next six months as the subindex for vacations intended declined to the lowest point in seven months.
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This article was written by Tuan Nguyen and originally appeared on 2023-02-28.
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