Consumer Confidence Slips in February Amid Inflation
Fewer consumers expect to make big purchases, like homes or vacations, over the next six months.
The Conference Board’s consumer confidence index fell to 110.5 in February from 111.1 in January, marking the second consecutive month of decline.
The consumer price index, which measures the average change in prices over time consumers will pay for a basket of goods and services, rose 0.6 percent month-over-month in January and 7.5 percent year-over-year, the largest 12-month increase since February 1982.
Despite rising costs due to inflation and low consumer sentiment, consumers have continued to spend, with retail sales in January surpassing analyst expectations.
“Concerns about inflation rose again in February, after posting back-to-back declines. Despite this reversal, consumers remain relatively confident about short-term growth prospects. While they do not expect the economy to pick up steam in the near future, they also do not foresee conditions worsening,” said Lynn Franco, senior director of economic indicators at The Conference Board, in a press release announcing the results.
“Nevertheless, confidence and consumer spending will continue to face headwinds from rising prices in the coming months.”
Consumers were slightly more optimistic about their current financial prospects compared with last month.
The Present Situation Index, which measures consumers’ outlook on current business and labor market conditions, rose to 145.1 from 144.5 last month.
Consumers’ views of current business conditions were mixed in February.
The percentage of consumers who said current business conditions are “good” decreased to 19 percent month-over-month from 20 percent, but those who said conditions were “bad” also decreased, down to 25 percent, compared with 27 percent in January.
Consumers also had mixed feelings about the labor market, with 54 percent of respondents saying jobs are “plentiful,” which is down from 55 percent last month but “still a historically strong reading,” said the Conference Board.
However, 11.8 percent said jobs are “hard to get,” slightly down from 12 percent in January.
Consumers were slightly less optimistic about the short-term business conditions.
The Expectations Index, which measures consumers’ short-term outlook for income, business, and labor market conditions, fell to 87.5 from 88.8 last month.
The percentage of consumers expecting short-term business conditions to improve fell from 23.6 percent to 23.4 percent, but fewer consumers expect business conditions to worsen—18 percent compared with nearly 20 percent last month.
Consumers were also less optimistic about the short-term labor market outlook, with 21 percent expecting more jobs to be available in the coming months, down from 22 percent last month.
More consumers expect fewer jobs to be available, up to 18 percent from 17 percent last month.
Looking at short-term financial prospects, consumers were less positive, with 15.7 percent of consumers expecting their incomes to increase, down from 16.2 percent last month.
The percentage of consumers expecting incomes to decrease was unchanged month-over-month at 12 percent.
“The Present Situation Index improved a touch, suggesting the economy continued to expand in Q1 but did not gain momentum. Expectations about short-term growth prospects weakened further, pointing to a likely moderation in growth over the first half of 2022,” Franco said.
The percentage of consumers planning to make big purchases, like homes, automobiles, major appliances, and vacations, over the next six months all fell, she said.
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