Surveys

Conference Board Predicts Recession Before Year’s End

SurveysJul 27, 2023

Conference Board Predicts Recession Before Year’s End

This is in spite of rising consumer confidence in July.

Hand holding shopping bags
The Conference Board’s consumer confidence index rose to 117 in July from 110.1 in June.
New York—U.S. consumers got a confidence boost in July, marking the second consecutive month of a positive outlook, though concerns about a recession grew. 
 
The Conference Board’s consumer confidence index increased to 117 in July from a slightly upwardly revised 110.1 in June. 
 
"Consumer confidence rose in July 2023 to its highest level since July 2021, reflecting pops in both current conditions and expectations," said Dana Peterson, chief economist at The Conference Board.  
 
"Headline confidence appears to have broken out of the sideways trend that prevailed for much of the last year. Greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000." 
 
The Present Situation Index, which measures consumers’ current view of business and labor market conditions, rose to 160 from 155.3 in June. 
 
Consumers’ assessment of business conditions was slightly more pessimistic in July. 
 
The percentage of respondents who said current business conditions are “good” was down to 22 percent from 23 percent in June, while those who said conditions were “bad” was unchanged at 15 percent. 
  
However, consumers had a more positive view of the labor market. 
  
The percentage of respondents who felt jobs were plentiful was up to 47 percent in July from 45 percent in June, while 10 percent said jobs were “hard to get” compared with 13 percent the previous month. 
 
"Assessments of the present situation rose in July on brighter views of employment conditions, where the spread between consumers saying jobs are 'plentiful' versus 'hard to get' widened further. This likely reflects upbeat feelings about a labor market that continues to outperform,” said Peterson.  
  
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The Expectations Index, which measures consumers’ outlook for income, business, and labor market conditions in the near future, rose to 88.3 from 80 in June. 
 
Eighty is the level associated with a recession within the next year.  
 
Prior to June, the index had been below 80 every month since February 2022, with the exception of a brief uptick in December 2022. 
 
“Despite rising interest rates, consumers are more upbeat, likely reflecting lower inflation and a tight labor market. Although consumers are less convinced of a recession ahead, we still anticipate one likely before year end,” said the Conference Board. 
 
Consumers were more optimistic about the short-term business conditions outlook, with 17 percent expecting business conditions to improve, up from 15 percent in June. 
  
Fewer respondents expect business conditions to worsen—14 percent compared with 18 percent. 
  
Consumers’ view of the short-term labor market also was more upbeat. 
  
More respondents expect more jobs to be available, up to 16 from 15 percent.  
  
Meanwhile, 15 percent expect there to be fewer jobs, down from 17 percent in June. 
 
"Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability. This likely reveals consumers' belief that labor market conditions will remain favorable,” said Peterson. 
 
Consumers’ short-term income expectations, however, were more pessimistic. 
  
Fewer respondents expect to see their incomes increase, down to 16 percent from 19 percent in June. 
 
However, 10 percent expect their incomes to decrease, down from 12 percent. 
 
“Expectations for future incomes ticked down slightly, a potential reflection of slower wage growth compared to a year ago,” said Peterson. 
 
The Conference Board recently added a new set of questions to its monthly survey, asking consumers how they felt about their family finances. 
 
In July, respondents’ answers reflected “still-healthy” family finances, said the Conference Board. 
 
The number of respondents who described their current family financial situation as “good” was 32 percent, up from 29 percent in June. 
 
Fewer respondents described their family financial situation as “bad,” down to 18 percent from 19 percent. 
 
Respondents’ more upbeat outlook on current family finances could reflect “softening inflation and continued income support from employment,” noted Peterson. 
 
Looking ahead, consumers’ outlook on their family finances in six months’ time faltered. 
 
Thirty-one percent of respondents said they expect their family finances to be “better,” down from 32 percent in June, while 14 percent expect them to be “worse,” up from 13 percent. 
 
The Conference Board also recently added a measure to gauge respondents’ thoughts on a recession. 
 
In July, 71 percent of consumers said a recession over the next 12 months is “somewhat” or “very likely,” up from 70 percent in June, though below its peak earlier in the year. 
 
Recession fears had been rising steadily since August 2022, said the Conference Board, but “eased considerably” in June, only to tick back up in July. 
 
"In our periodic survey of services, consumers continued to report intentions to spend less on discretionary services—including travel, recreation, and gambling—going forward,” said Peterson. 
 
“By contrast, they anticipate spending more in the months ahead on necessary services like health care, as well as cheaper services like streaming from home." 
 

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