Consumer confidence has hit a rock bottom not seen since 2014.
The Conference Board’s Consumer Confidence Index fell for the second consecutive month, declining in August to 84.8 from 91.7 in July. Of the two components in the Index, the Present Situation Index fell the sharpest from 95.9 to 84.2, reflecting consumers’ current assessment of business and labor market conditions. The Expectations Index slipped from 88.9 to 85.2, reflecting consumers’ short-term outlook for income, business and labor market conditions.
“Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead,” said Lynn Franco, senior director of economic indicators at The Conference Board, whose random survey was conducted by analytics firm Nielsen, with Aug. 14 as the cutoff date for preliminary results.
“Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month,” Franco added.
Although many consumers responded with “initial relief” as governments began lifting lockdowns, that sentiment, said Wells Fargo Securities senior economist Tim Quinlan, “has been replaced by a resigned acceptance of a new way of life.”
Consumer confidence is now lower than it was in April and May, the height of the lockdowns, but doesn’t appear as battered as it typically might be during a recession, he added.
“The number of new COVID cases was on the rise throughout June and most of July, but has been coming down more recently. While there is not a long enough time series to make a bulletproof case, it appears that confidence lags the progress with the virus, at least to some extent,” he said. “If recent progress at containing the virus holds, there is a reasonable case for confidence to snap back.”
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The coronavirus outbreak began in March in the U.S., and many retailers from apparel stores to restaurants and other nonessential retailers that were forced to temporarily shut down have remained closed. Others began reopening, but were forced to close again as infections began to rise in California, Texas, Florida and Arizona.
For now, the percentage of consumers in the August survey who said business conditions are “good” fell from 17.5 percent to 16.4 percent, while those who said conditions are “bad” rose from 38.9 percent to 43.6 percent. Their perception of the current job market conditions didn’t fare well either, with the share of those stating that jobs are “hard to get” rising from 20.1 percent to 25.2 percent.
Looking ahead about six months out, consumers who said they expect business conditions to improve declined from 31.6 percent to 29.9 percent. As far as their own short-term income prospects, the percentage of consumers who said they expect an increase fell from 14.8 percent to 12.7 percent, while those expect a decrease rose from 15.8 percent to 16.6 percent.