Consumer confidence slumped in February amid recession concerns
Feb 28, 2023, 10:25 AM
LOS ANGELES, CALIFORNIA - FEBRUARY 13: A person shops in the beef section of a supermarket on February 13, 2023 in Los Angeles, California. January's Consumer Price Index (CPI) will be released tomorrow showing the latest inflation data and providing perspective on possible future interest rate hikes by the Federal Reserve. (Photo by Mario Tama/Getty Images)
(Photo by Mario Tama/Getty Images)
(CNN) — American consumers felt much worse about the US economy in February amid rising interest rates and concerns about a potential recession, according to the latest survey data released Tuesday by the Conference Board.
The business research group’s consumer confidence index fell to 102.9 in February from a downwardly revised 106 the month before.
Economists were expecting the headline index to measure 108.5, according to Refinitiv consensus estimates.
The Conference Board’s consumer confidence report caps off a particularly strong month for the US economy, including a jobs report that showed a whopping 517,000 positions were added in January.
The closely watched survey found that while consumers in February are bullish about their current job prospects — 48.2% of those surveyed said jobs were “plentiful,” up from 46.4% in January — that confidence sinks when looking ahead to six months from now.
“The outlook appears considerably more pessimistic when looking ahead,” Ataman Ozyildirim, senior director of economics at the Conference Board, said in a statement. “Expectations for where jobs, incomes, and business conditions are headed over the next six months all fell sharply in February.”
The expectations index tumbled to 69.7, the lowest reading since July 2022, when record gas prices were stinging and inflation was coming off a fresh 40-year high. A reading below 80 often signals that a recession will occur within the next year.
“If consumers drive the economy, the outlook for 2023 is bleak, as the consumers expect that the worst is yet to come,” said Chris Rupkey at FwdBonds. “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.”
Still, in addition to a slight uptick in current expectations (the present situation index increased to 150.9 from 147.4), consumers’ inflation expectations also showed improvement in the February report: Down to 6.3% from 6.7% for the 12 months ahead.
“Consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates,” Ozyildirim said. “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.”
The Conference Board’s confidence index and the University of Michigan’s twice-a-month consumer sentiment index are two leading gauges of consumers’ attitudes toward the current and future strength of the economy. Although the two indexes typically track similarly over time, the consumer confidence index is more influenced by employment and labor market conditions, while the Michigan sentiment index has a greater emphasis on household finances and the impact of inflation.
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