Economic Outlook – Update
The Conference Board has released its latest findings, indicating that American consumer sentiment regarding economic prospects in February has grown more negative, attributed largely to escalating concerns about economic deceleration and persistent inflationary pressures.
The Consumer Confidence Index has seen a notable decline to 98.3 this month, marking a seven-point drop from January and falling short of analysts’ expectations, which were forecasted at 102.3. This figure represents the lowest level recorded since June 2024 and constitutes the most significant monthly decrease since August 2021.
According to analysts, “Perceptions regarding current labor market conditions have soured. Consumers are expressing pessimism regarding future employment opportunities and exhibit reduced optimism about income prospects.”
The analysts further noted that “Expectations surrounding future employment conditions have worsened, reaching the highest deteriorating level in ten months.”
While most economic indicators continue to exhibit signs of growth, the Conference Board’s findings align with other recent surveys that highlight a decline in consumer confidence. For instance, the University of Michigan recently reported a more significant than anticipated 10% drop in its consumer confidence index for February, alongside heightened inflation expectations among respondents, the highest observed since 1995.
The Conference Board’s survey, conducted through February 19, reflects this decline in consumer assurance across various age groups and income brackets.
In addition to the overall reduction in confidence, the expectation index fell by 9.3 points to a reading of 72.9, dipping below levels indicative of a recession for the first time since June 2024. However, there was a slight improvement in current conditions, with 19.6% of respondents describing conditions as “good,” reflecting an increase of 1.1 percentage points from January.
Conversely, the labor market index saw a decline; 33.4% of respondents indicated that jobs are “plentiful,” while 16.3% reported that jobs “are hard to find,” a shift from January’s figures of 33.9% and 14.5%, respectively.
Consumer pessimism is further exacerbated by President Donald Trump’s recent threats to impose additional tariffs on U.S. trading partners. He reiterated plans to implement tariffs on Canada and Mexico in March after their suspension in February.
Economists are concerned that the introduction of these tariffs could trigger another wave of inflation, complicating the Federal Reserve’s deliberations on whether to lower interest rates or maintain the current rates. Policymakers are closely monitoring the implications of the President’s trade and financial policies.
“We anticipate some short-term behavioral shifts from consumers. Many are increasingly anxious about the potential impacts of upcoming tariffs, which might lead them to accelerate purchase decisions in anticipation of rising import prices,” analysts stated.
Following the release of this consumer confidence index, stock prices fell, and the yield on 10-year Treasury bonds decreased by approximately 10 basis points, settling at 4.29%.
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