Overall Confidence Ticked Up, But Consumers Showed More Concern About the Labor Market
US Consumer Confidence Rises Slightly in August – The Conference Board reported that the Consumer Confidence Index rose to 103.3 in August. This is up from 101.9 in July. The Present Situation Index, which reflects consumers’ views on current business and labor conditions, improved to 134.4 from 133.1 in July. Additionally, the Expectations Index, which measures the short-term outlook for income and jobs, increased to 82.5.
August marks the second consecutive month that the Expectations Index is above 80. A reading below 80 usually indicates a possible recession. The cutoff date for these preliminary results was August 21, 2024.
Consumer Sentiment Mixed
Dana M. Peterson, Chief Economist at The Conference Board, noted that consumer confidence rose in August. However, it remains within a narrow range that has persisted for the past two years. Consumers felt more positive about business conditions, but they showed more concern about the labor market. Although assessments of the current labor situation were still positive, they continued to weaken. Moreover, consumers expressed a more pessimistic outlook for future job availability. This change likely reflects the recent increase in unemployment.
Confidence varied among different age groups. In August, younger consumers under 35 experienced a decline in confidence, while those 35 and older saw an increase. For consumers earning less than $25K, confidence declined despite overall improvements. In contrast, those earning over $100K remained the most confident.
US Consumer Confidence Rises in August – Financial Market Impact
Peterson mentioned that financial market turmoil in early August may have rattled consumers. Less optimism about the stock market was noted. In August, only 46.9% of consumers expected stock prices to rise over the next year, down from 50.6% in July. Conversely, 27.2% expected prices to decrease, up from 23.1%.
Consumers’ views on a potential recession remained unchanged. The proportion predicting a recession stayed stable and well below the peak of 2023.
Consumers felt less positive about their family’s current financial situation. However, they were more optimistic about the next six months.
Inflation and Interest Rate Expectations
Average 12-month inflation expectations dropped to 4.9% in August. This is the lowest level since March 2020. This decline aligns with slower overall inflation and decreasing prices for some goods. At the same time, the share of consumers expecting higher interest rates over the next year fell to 46.5%, the lowest since February 2024. Conversely, 31.5% expect lower rates, the highest since April 2020.
When it comes to purchasing plans, intentions to buy homes hit a new 12-year low. However, plans for car purchases improved slightly. Buying plans for big-ticket appliances rose, driven by demand for refrigerators, TVs, and washing machines. Additionally, plans to buy smartphones or laptops also increased.
US Consumer Confidence Rises in August – Conclusion
The Consumer Confidence Survey suggests that Americans are cautiously optimistic. While some consumers show increased confidence, concerns about the labor market and inflation remain. Moving forward, consumers will likely keep a close eye on economic developments, particularly regarding inflation and interest rates.
SOURCE The Conference Board
