U.S. Consumer Confidence Plummets As The Worst Is Expected

The economic environment is OK for now, but a recession is on the way. That's the reading of the environment reflected in the Conference Board's August Index of Consumer Confidence. It fell by one-quarter m/m to 44.5 after a moderate, little-revised 2.8% July increase. The latest figure was the lowest since April 2009 and it was well short of Consensus expectations for a reading of 53.3. During the last ten years there has been 47% correlation between the level of confidence and the three-month change in real personal consumption expenditures.

While both of the index components fell, it was a decline in the expectations subgroup of confidence which led the downturn with a 30.7% m/m drop. Expectations for improved business conditions and employment in six months both plummeted and were near the lowest levels since early-2009. Income expectations also fell to their worst since the Fall. Lower oil prices and the weak economy probably caused consumers to expect the inflation rate in twelve months to hold at a lower 5.8%, the lowest since February. However, interest rates in twelve months were expected to be higher by an increased 58.9% of respondents while just 13.8% expected rates to fall. A greatly lessened 20.7% of respondents expected stock prices to rise while an increased 50.3% expected decline. A higher 4.9% planned to buy a home within six months.

The present situations component of the consumer confidence index fell 6.7% to 33.3, the fourth consecutive monthly decline. Nevertheless, it remained up by roughly one-third versus twelve months ago. Business conditions were seen as good by a slightly diminished 13.7% and as bad by a slightly increased 40.6%. Jobs were seen as hard to get by a higher 49.1% of respondents which was nearly its cycle high.

The Conference Board data can be found in Haver's CBDB database. The expectation figure is the AS1REPNA database.