February Consumer Confidence Dips
The Conference Board, New York, reported its Consumer Confidence Index fell in February amid financial uncertainty.
The Index, which had increased moderately in January, declined in February. The Index now stands at 92.2, down from 97.8 in January. The Present Situation Index declined from 116.6 to 112.1, while the Expectations Index decreased from 85.3 to 78.9 in February.
“Consumers’ assessment of current conditions weakened, primarily due to a less favorable assessment of business conditions,” said Lynn Franco, Director of Economic Indicators with The Conference Board. “Consumers’ short-term outlook grew more pessimistic, with consumers expressing greater apprehension about business conditions, their personal financial situation, and to a lesser degree, labor market prospects. Continued turmoil in the financial markets may be rattling consumers, but their assessment of current conditions suggests the economy will continue to expand at a moderate pace in the near-term.”
The report said consumers’ assessment of present-day conditions declined in February. The percentage saying business conditions were “good” decreased from 27.7 percent to 26.0 percent. Those saying business conditions are “bad” increased from 18.8 percent to 19.8 percent. Consumers’ appraisal of the labor market was also less positive. Those claiming jobs are “plentiful” decreased from 23.0 percent to 22.1 percent, while those claiming jobs are “hard to get” rose to 24.2 percent from 23.6 percent.
The report also said consumers appeared more pessimistic about the short-term outlook than in January. The percentage of consumers expecting business conditions to improve over the next six months declined from 15.9 percent to 14.6 percent, while those expecting business conditions to worsen increased from 10.7 percent to 12.0 percent. Consumers’ outlook for the labor market was less optimistic. Those anticipating more jobs in the months ahead decreased from 13.4 percent to 12.2 percent, while those anticipating fewer jobs increased slightly from 17.0 percent to 17.2 percent. The proportion of consumers expecting their incomes to increase declined from 18.6 percent to 17.2 percent, while the proportion expecting a reduction in income increased from 10.7 percent to 12.5 percent.
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said after maintaining momentum in January, volatility in equity markets appears to have adversely affected consumers’ assessment of the current economic landscape.
“February’s reading of consumer confidence showed that consumers’ views of both the current and future economic situation deteriorated over the past month,” Vitner said. “The major storyline so far this year has been the volatility and sell-off of global equity markets, stoking fears about a possible recession.
The report noted consumers’ plans to buy a home pulled back again in February, while fewer consumers reported plans to buy a major appliance. “While there are clearly mixed signals, the plans to buy measures suggest that the actual effects on real consumer spending may be limited,” Vitner said. “While the pullback in confidence is a bit concerning, it will likely take more than one month of soft confidence data to have a dramatic effect on real consumer spending.”
