Consumer Confidence Retreats in February

The Conference Board's Consumer Confidence Index® retreated in February after falling 4.2 points. The index fell to 106.7 from January's downwardly revised 110.9. This month's reading was lower than expected, falling short of the 114.8 forecast.

The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, dropped to 147.2 in February from 154.9 in January. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, decreased to 79.8 in February from 81.5 in January. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year.

“The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy,” said Dana Peterson, Chief Economist at The Conference Board. “The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000. Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54.”

Peterson added: “February’s write-in responses revealed that 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. But they are more concerned about the labor market situation and the US political environment.”

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Background on the Consumer Confidence Index

The Conference Board Consumer Confidence Index measures the consumers attitudes and confidence in the economy, business conditions, and labor market, with higher readings indicating higher optimism. The general assumption is that when consumers are more optimistic they will spend more and stimulate economic growth. However, if consumers are pessimistic then spending will decline and the economy may slow down. The index is based on a 5 question survey, with 2 questions related to present conditions and 3 questions related to future expectations. The survey began in 1967 and was conducted every two months but changed to monthly reporting in 1977, which is where our data begins.