Is the American consumer cautiously confident? Confidently cautious? Somewhere in the middle?
The Conference Board released its Consumer Confidence Index Tuesday (Aug. 27), which showed a slight uptick but didn’t produce a definitive answer. However, when you mix in earnings season results, it’s hard to argue for anything but “cautious” as a critical fourth quarter looms in a little more than 30 days.
Officially, consumer confidence in the U.S. showed signs of improvement in August, suggesting economic resilience despite ongoing challenges. The Confidence Index rose to 103.3 from July’s revised 101.9, portraying cautious optimism among American consumers.
The uptick, while modest, comes at a time of mixed economic signals. Consumers expressed more positive views on current and future business conditions, yet their outlook on the labor market dimmed. This dichotomy reflects the complex economic landscape, where robust business activity coexists with concerns about job stability.
“Consumers continued to express mixed feelings in August,” The Conference Board Chief Economist Dana M. Peterson said in a statement.
The Present Situation Index, measuring current conditions, climbed to 134.4 from 133.1, while the forward-looking Expectations Index reached 82.5, staying above the critical 80-point threshold for the second consecutive month.
“Consumers were likely rattled by the financial market turmoil in early August, as they were less upbeat about the stock market,” Peterson said in the statement. “In August, 46.9% of consumers expected stock prices to increase over the year ahead (down from 50.6% in July), while 27.2% expected a decrease (up from 23.1%),” said Peterson.
Inflation expectations fell to 4.9%, the lowest since March 2020, indicating that consumers are beginning to see light at the end of the inflationary tunnel. This shift in sentiment aligns with economic data showing a gradual easing of price pressures.
However, the report wasn’t without warning signs. Confidence among those in lower income brackets declined, highlighting ongoing economic disparities. Additionally, home purchasing plans hit a 12-year low on a six-month moving average, suggesting potential headwinds for the housing market.
The labor market, long a pillar of economic strength, showed signs of softening. The percentage of consumers viewing jobs as “plentiful” decreased, while those finding jobs “hard to get” inched up. This shift comes as data indicates a slight uptick in unemployment and warning signs about the labor market from chief economists working in the payments and banking sector.
“The Fed’s impending rate cuts should bolster the economy, in our view, and current financial stability is indicated by moderate delinquency, downgrade and default levels,” Goldman Sachs said in a macroeconomic trend report this month. “However, Q2 earnings commentaries have raised concerns, especially among lower-income consumers, which deserve attention. The labor market’s condition is increasingly critical for the Fed’s policy decisions, as employment and income growth are vital for consumer spending, a key economic driver. We’re closely watching labor market data, with a focus on the August jobs report and initial jobless claims, though these may fluctuate due to seasonal factors.”
As PYMNTS reported, Q2 earnings showed an inconsistent picture of the consumer. Some companies (quick-services restaurants, or QSRs) showed cracks appearing among the paycheck-to-paycheck consumer, while others, like Walmart, used phrases like “appropriately cautious” to describe the balance of 2024.
Some economists see a bit of a slide coming in Q4.
“So, you know, the good news there is that that’s now consistent with the Fed’s long-term 2% goal,” said Nationwide economist Daniel Vielhaber on the company’s most recent “Monthly Review” podcast. “But the bad news is we’ve got slower job growth, slower wage growth, that leads to slower income growth, and ultimately to less consumer activity, less consumer spending. And that’s what we’re expecting to see as we move forward in the second half.”