Consumer confidence in the U.S. economy fell in February as rising interest rates and fears of a recession weighed on the minds of Americans, according to the latest survey data released by The Conference Board on Tuesday.
The Conference Board’s Consumer Confidence Index gauges attitudes about the strength of the economy, “prevailing business conditions and likely developments for the months ahead.” The widely followed metric measured at 102.9 in February, falling from the downwardly revised 106.0 in January, marking a decrease for the second month in a row.
“Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board.
The U.S. economy added 517,000 jobs in January as the unemployment rate fell to 3.4%, the lowest since May 1969. According to the survey report, an increase in the Present Situation Index shows consumers are optimistic about the current labor market. Still, they remain wary of the future direction of the economy.
“The proportion of consumers saying jobs are ‘plentiful’ climbed to 52.0%—back to levels seen in the spring of last year. However, the outlook appears considerably more pessimistic when looking ahead. Expectations for where jobs, incomes, and business conditions are headed over the next six months all fell sharply in February.”
The Expectations Index, which gauges consumers’ short-term outlook for income, business and labor market conditions, fell to 69.7 from a downwardly revised 76.0 in January.
“Notably, the Expectations Index has now fallen well below 80—the level which often signals a recession within the next year. It has been below this level for 11 of the last 12 months.”
The newest reading is the lowest since July 2022, when gas prices hit an all-time national high. While 12-month inflation expectations improved, down from 6.7% to 6.3%, consumers are showing signs of reducing their spending due to high prices and rising interest rates.
“Fewer consumers are planning to purchase homes or autos, and they also appear to be scaling back plans to buy major appliances. Vacation intentions also declined in February.”
FwdBonds Chief Economist Chris Rupkey told CNN, “If consumers drive the economy, the outlook for 2023 is bleak, as the consumers expect that the worst is yet to come.”
“Coming on the heels of a gigantic 517,000 new payroll jobs report in January, current conditions, especially in the labor market, look great, but the future path of the economy is very much in doubt.”
The other leading gauge of consumer confidence, the University of Michigan’s Consumer Sentiment Index, increased in February from 64.9 to 66.4.
Both indexes tend to move in tandem with one another over time. However, the Michigan Sentiment Index is swayed more by household finances and inflation impact, while the Consumer Confidence Index is more influenced by employment and labor market conditions.
“The strong jobs market continues to boost consumers’ spirits, but they see trouble ahead in categories that affect them most: jobs and incomes,” Robert Frick, an economist with Navy Federal Credit Union, told CBS News. “Confidence is now strongly linked to high inflation, and if inflation falls this year as most forecasts suspect, we could see a commensurate rise in confidence.”
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at firstname.lastname@example.org.