The confidence of American households in the health of the U.S. economy unexpectedly declined in August, with optimism about the future dropping near to levels typically associated with the approach of a recession.
The index of U.S. consumer confidence fell to 106.1 in August from a revised 114 in the prior month, the Conference Board said Tuesday. Economists had forecast a reading of 116.6, down slightly from the initial reading of 117.0 for July. The prior month’s figure was revised down 114.0.
“Consumer confidence fell in August 2023, erasing back-to-back increases in June and July,” said Dana Peterson, Chief Economist at The Conference Board. “August’s disappointing headline number reflected dips in both the current conditions and expectations indexes.
The gauge of how consumers feel about current economic conditions declined to 114.9 from 153.0. The share of consumers saying jobs are plentiful dropped to 40.3 percent from 43.7 percent in July. The share of those saying jobs are “hard to get” rose to 14.1 percent from 11.3 percent.
The share of consumers saying business conditions are bad rose by one point to 17.2 percent. The share saying conditions are good was unchanged at 20.7 percent.
Consumer fears of inflation are once again on the rise.
“Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” Peterson said.
Consumers also turned less optimistic about the economy six months from now. The expectations index dropped to 80.2 in August, undoing a sharp increase in optimism in July that had sent the index up to 88.0. The Conference Board noted that expectations are just a hair above 80, the level that historically signals a recession within the next year.
“Although consumer fears of an impending recession continued to recede, we still anticipate one is likely before yearend,” the Conference Board noted.
Eighteen percent expect fewer jobs, up from 15.6 percent. The share expecting more jobs was up slightly to 16.7 percent from 16.6 percent in July. The share expecting their income to fall rose to 12.4 percent from 9.9 percent a month ago. The share expecting income to rise fell to 16.5 percent from 17.8 percent.
Consumers were also less optimistic about business conditions. The share expecting business conditions to worsen rose to 16.8 percent from 14.5 percent in the prior month. The share expecting improving conditions declined to 16.2 percent form 17.2 percent last month.
The share of consumers expecting a recession fell to its lowest level of the year.
“The proportion of consumers saying recession is ‘somewhat’ or ‘very likely’ ticked down again in August but remain elevated at 69.0%. These soundings likely reflect ongoing uncertainty given mixed buying plans. 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,” Peterson said.
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