Americans’ confidence took two steps forward (June and July) and one step back. Higher prices had an impact along with less certainty about the job market.
BOSTON – The August Conference Board Consumer Confidence Index declined in August to 106.1, from a downwardly revised 114.0 in July, reflecting a bit less optimism among Americans.
The Present Situation Index – consumers’ assessment of current business and labor market conditions – fell to 144.8 from 153.0.
The Expectations Index – consumers’ short-term outlook for income, business and labor market conditions – declined to 80.2, a notable switch in direction from July’s 88.0. Still, expectations were a hair above 80 – the level that historically signals a recession within the next year, though board analysts “still anticipate one is likely before year-end.”
“Consumer confidence fell in August 2023, erasing back-to-back increases in June and July,” says Dana Peterson, chief economist at The Conference Board. “August’s disappointing headline number reflected dips in both the current conditions and expectations indexes.”
Peterson says write-in responses showed that consumers are again preoccupied with rising prices in general, and for groceries and gasoline in particular.
“Assessments of the present situation dipped in August on receding optimism around employment conditions: fewer consumers said jobs are ‘plentiful’ and more said jobs are ‘hard to get,” she says. “Hard data confirm that employment gains have slowed, overall wage increases are less generous compared to a year ago, and the average number of weeks of unemployment is ticking upward. Business conditions in August were little changed from July, but still somewhat lower than in June.”
When asked about current family financial conditions – a measure not used when calculating the Present Situation Index – the share of respondents citing “good” fell and those citing “bad” rose.
“Expectations for the next six months tumbled back near the recession threshold of 80, reflecting less confidence about future business conditions, job availability and incomes,” Peterson says. “Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing and interest rates continue to rise – making big-ticket items more expensive. Notably, expectations for interest rates jumped in August after falling two months ago.
“The proportion of consumers saying a recession is ‘somewhat’ or ‘very likely’ ticked down again in August but remain elevated at 69.0%. … On a six-month moving average basis, plans to purchase autos and appliances continued to trend upward but plans to buy homes – more in line with rising interest rates – continued to trend downward.
“The dip in overall confidence notwithstanding, consumer plans to go on vacation, especially abroad, leapt upward in the month and slightly exceeded August 2022 readings, suggesting a continued penchant for spending on services.”
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