Consumer confidence in the US falls for a second month
U.S. consumer confidence fell for a second month amid data showing home price growth was slowing as recession fears persisted.
- US consumers lowered their expectations for the labor and business markets, reporting confidence levels that would normally signal an impending recession.
- Consumers are holding back on large purchases, such as homes or cars, for fear of a weaker market.
- Home prices fell in December, signaling a market readjustment after record growth in 2021.
The Conference Board’s consumer confidence index fell 2.9 percent in February from the previous month. An index of expectations, based on consumers’ near-term outlook for income and business, fell 8.3 percent to 69.7, more than 10 points below 80, the level that signals a recession next year. The index has been below 80 for 11 of the last 12 months.
“The decline reflects large declines in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozildirim, senior director of economics at the Conference Board.
Overall, 17.8 percent of consumers said in February that business conditions were “good,” down from 19.9 percent in January.
Consumers became more pessimistic about short-term business conditions in February, with 14.2% of people expecting them to improve, down from 18.4% who said the same in January.
Americans also expect their incomes to grow at a slower pace, according to the data. Only 13.4% of consumers expect short-term stimulus, down from 17.4% in January. About 52 percent said jobs were “abundant,” down from 48.1 percent in January, while 10.5 percent of consumers described jobs as “hard to find,” down from 11.1 percent in January.
“Although 12-month inflation expectations have improved – falling to 6.3% from 6.7% last month – consumers may be showing early signs of pulling back on spending in the face of high prices and rising interest rates,” Ozyildirim said. “Fewer consumers are planning to buy homes or cars and also appear to be reducing their plans to buy major appliances. Vacation intentions also fell in February.”
Lower consumer confidence is also weighing on the housing market as higher mortgage rates weigh on sales and price growth slows, according to the S&P CoreLogic Case-Shiller US National Home Price NSA Index.
Home prices rose 5.8 percent in December, according to the index, up from a 7.6 percent pace the previous month.
The 10-city composite, which includes New York and Los Angeles, rose 4.4 percent in December from a year earlier, down from 6.3 percent in November. The 20-city composite, which includes Seattle and Dallas, grew 4.6 percent year over year in December, down from a 6.8 percent pace in November.
“The cooling in home prices that began in June 2022 continued through the end of the year as December marked the sixth consecutive month of declines for our National Composite Index,” said Craig J. Lazzara, managing director of S&P DJI.