American Consumer Confidence Slumps in August with Employment Anxiety

The Conference Board said Consumer Confidence slumped to 106.1 in August (consensus 116.0) from a downwardly revised 114.0 (from 117.0) in July. In the same period a year ago, the index stood at 103.6.
Two things stood out, the revision of the previous number and the receding optimism about employment conditions negatively affected consumers’ view of the present situation and outlook for consumers’ family finances. High interest rates, inflation coming down but rising prices in general, and for groceries and gasoline in particular are reflected with less hope. Consumers continued to report intentions to spend less on discretionary services.

The expectations Index rose above the 80.0 for just the second time in 16 months of the last 17. Expectations 80 level historically signals a recession within the next year. Despite rising interest rates, consumers are more upbeat, likely reflecting lower inflation and a tight labor market. Although consumers are less convinced of a recession ahead, still anticipating one likely before yearend.

American consumers’ short-term outlook shows a bounce back after they had become became decidedly gloomy, becoming considerably less upbeat about their short-term income prospects. That was scuppering plans to buy homes, autos, and major appliances. We will see if the change is a relief or meaningful.

US Consumer Confidence August 2023

US CB Consumer Confidence August: 106.1 (1985=100) from a downwardly revised 114.0 in July.

  • Down from a downwardly revised 114.0 (from117) in July
  • The Present Situation Index fell to 144.8 (1985=100) from 153.0.
  • The Expectations Index declined to 80.2 (1985=100) in August, reversing July’s sharp uptick to 88.0

“Consumer confidence fell in August 2023, erasing back-to-back increases in June and July,” said Dana Peterson, Chief Economist at The Conference Board. “August’s disappointing headline number reflected dips in both the current conditions and expectations indexes. Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular. The pullback in consumer confidence was evident across all age groups—and most notable among consumers with household incomes of $100,000 or more, as well as those earning less than $50,000. Confidence held relatively steady for consumers with incomes between $50,000 and $99,999.”

    “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.” 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 included in calculating the Present Situation Index), the share of respondents citing a “good” situation fell, and those citing “bad” conditions rose, signaling concerns about family finances presently.”

    “Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability. This likely reveals consumers’ belief that labor market conditions will remain favorable. Expectations for future incomes ticked down slightly, a potential reflection of slower wage growth compared to a year ago. The measure of expected family financial situation, six months hence (not included in the Expectations Index) also softened somewhat in July—despite further decline in the 12-month forward inflation expectations gauge.

    “The proportion of consumers saying recession is ‘somewhat’ or ‘very likely’ ticked down again in August but remain elevated at 69.0%. These soundings likely reflect ongoing uncertainty given mixed buying plans. 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.”

    Present Situation

    Consumers’ assessment of current business conditions was slightly less positive in August.

    • 20.7% of consumers said business conditions were “good,” unchanged from July.
    • 17.2% said business conditions were “bad,” up from 16.2%.

    Consumers’ appraisal of the labor market deteriorated in August.

    • 40.3% of consumers said jobs were “plentiful,” down from 43.7% in July.
    • 14.1% of consumers said jobs were “hard to get,” up from 11.3%.

    Expected Spending on Services, Next Six Months 

    (July 2023 Survey)

    “In our periodic survey of services, consumers continued to report intentions to spend less on discretionary services—including travel, recreation, and gambling—going forward. By contrast, they anticipate spending more in the months ahead on necessary services like health care, as well as cheaper services like streaming from home.” 

    Stock market performance and Sentiment Closely Correlated.

    Source: University of Michigan and Yahoo

    About The Conference Board

    The Conference Board publishes the Consumer Confidence Index® at 10 a.m. ET on the last Tuesday of every month. Subscription information and the technical notes to this series are available on The Conference Board website: https://www.conference-board.org/data/consumerdata.cfm.

    The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org.

    Source: The Conference Board

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