Lower index erases gains seen in June and July as consumers deal with higher gas prices and interest rates
WASHINGTON — Consumer confidence fell in August among both higher- and lower-income respondents amid rising gas prices and interest rates, combined with concerns about overall business conditions.
The index declined in August, to 106.1, from a downwardly revised 114 in July, which the Conference Board said reversed back-to-back gains in June and July. Officials noted that confidence fell across age groups and was most notable among consumers with annual household incomes over $100,000 and for those earning less than $50,000 per year. For those in the middle, it held steady, the Conference Board said.
The Present Situation Index, which is based on consumers’ assessment of current business and labor market conditions, fell to 144.8 from 153 in July. Some 20.7% of consumers said business conditions were good, unchanged from July, while 17.2% said business conditions were bad, up from 16.2%.
Meanwhile the Expectations Index, which is based on consumers’ short-term outlook for income, business and labor market conditions, declined to 80.2 from 88 in July. Officials noted that this index was still 2 points over the level that historically signals a recession within the year. Some 16.2% of those surveyed said they expect business conditions to improve in six months, down from 17.2% in July. Some 16.8% expect business conditions to worsen, up from 14.5% in July.
“August’s disappointing headline number reflected dips in both the current conditions and expectations indexes,” said Dana Peterson, chief economist at the Conference Board. “Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular.”
Peterson added that the Present Situation Index illustrates some concern related to employment conditions with fewer consumers saying jobs are plentiful and more saying jobs are harder to get. Some 40.3% of consumers said jobs were plentiful, down from 43.7% in July. Meanwhile, 14.1% of consumers said jobs were hard to get, up from 11.3% in July.
“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,” Peterson said. “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.”
Although the proportion of consumers believing that a recession is somewhat or very likely were slightly lower in August, it remained elevated at 69%.
“These soundings likely reflect ongoing uncertainty given mixed buying plans,” Peterson said, noting that expectations were near a recession threshold of 80, as consumers continue to hear negative news about corporate earnings and are showing less confidence about future business conditions, job availability and incomes. “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.”
The report also noted that consumers’ assessment of the short-term labor market was less favorable in August, with 18% expecting fewer jobs, up from 15.6% in July. Some 16.5% expect their incomes to increase, down from 17.8% in July, and 12.4% expect their incomes will decrease, up from 9.9% in July.
In addition to consumer concerns about rising interest rates and higher gas prices, their outlook for stock prices also has fallen while overall expectations for higher inflation have risen.