Dive Brief:
- Consumer confidence fell in February, breaking a three-month rising streak, on a dimmer view of the labor market, household finances and prospects for business, the Conference Board said Tuesday.
- The mood of consumers sagged amid “persistent uncertainty about the U.S. economy,” Conference Board Chief Economist Dana Peterson said in a statement. The outlook faded among households in all income groups except those annually earning less than $15,000 or more than $125,000, she said.
- “While overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months,” Peterson said. “But they are more concerned about the labor market situation and the U.S. political environment.”
Dive Insight:
Consumer spending, which accounts for nearly 70% of gross domestic product, is showing signs of sputtering at the start of 2024 after propelling better-than-expected economic growth last year.
Credit and debit card spending per household in January declined 0.2% compared with January 2023, after a 0.2% year-over-year increase in December, Bank of America said.
“We continue to expect a solid consumer spending performance in 2024, but momentum will be a little more subdued than the robust 2.2% advance in 2023,” EY said in a report, forecasting 2% growth in outlays this year.
“Softer employment conditions will likely translate into more modest income momentum, while cost fatigue weighs on consumer wallets in the early part of the year,” EY said.
Compared with last month, consumers in February saw a greater likelihood of recession in the next six months, the Conference Board said. They also scaled back plans to purchase homes, autos and “big-ticket appliances,” and a larger proportion expect borrowing costs will rise compared with last month’s survey.
“Confidence remains below levels that would be consistent with consumers getting their ‘vibe’ back fully” to the pre-pandemic level, according to Bank of America.
When stopping at grocery stores, gas stations, and restaurants and bars, “consumers are consistently confronted with the ‘sticker shock’ of higher prices,” Bank of America said. “Even though inflation in all these spending categories has fallen back, prices (even in gasoline) remain significantly above where they were before the pandemic.”
With inflation cooling and pay among low- and middle-income households growing, “sticker shock” should start to fade, Bank of America said, citing its data. Consumers have sustained a buffer in savings and show no significant sign of tapping into their retirement nest eggs.
Households are not completely crestfallen. In this month’s survey, average expectations for inflation in a year fell to 5.2%, or the lowest point since the 4.5% level in March 2020, the Conference Board said.
Also, “consumers remained upbeat about stock prices over the year ahead,” according to the Conference Board. The Standard & Poor’s 500 index has increased 7% this year.