Consumers have been feeling the waves of unrest in the economy, with mortgage rates now back up above 7% and the PCE index—the Fed’s favorite measure of inflation—up by 2.8% year-over-year.
Consumer confidence fell significantly in April, dropping from 103.1 in March to 97, according to the latest data from The Conference Board.
After the strong start to 2024, with a two year high in January, this is now the third month of drops in readings following a large drop in February and a small decrease in March.
“Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income,” said Dana M. Peterson, chief economist at The Conference Board. “Despite April’s dip in the overall index, since mid-2022, optimism about the present situation continues to more than offset concerns about the future.”
Peterson continued, “In the month, confidence declined among consumers of all age groups and almost all income groups except for the $25,000 to $49,999 bracket. Nonetheless, consumers under 35 continued to express greater confidence than those over 35. In April, households with incomes below $25,000 and those with incomes above $75,000 reported the largest deteriorations in confidence. However, over a six-month basis, confidence for consumers earning less than $50,000 has been stable, but confidence among consumers earning more has weakened.”
The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined from 146.8 to 142.9. For current business conditions, 20.6% of consumers said they were “good,” up from 19.2% last month. Meanwhile, 17.4% said business conditions were “bad,” down from 17.6% last month. For the labor market, 40.2% of consumers said jobs were “plentiful” (down from 41.7%), while 14.9% of consumers said jobs were “hard to get” (up from 12.2%).
“According to April’s write-in responses, elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up,” added Peterson.
The Expectations Index—based on consumers’ short-term outlook for income, business and labor market conditions—fell from 74 to 66.4 (1985 = 100).
As for consumers’ short-term business conditions outlook, 12.8% expect business conditions to improve (down from 14.3%), and 19.9% expect conditions to worsen (up from 18.5%). For the labor market outlook, 11.7% of consumers expect more jobs to be available (down from 14.3%), and 19.6% anticipate fewer jobs (up from 18.8%). For short-term income prospects, 15.4% of consumers expect their incomes to increase (down from 17.3%), and 13.9% expect a decrease (up from 13.5%).
“Average 12-month inflation expectations remained stable at 5.3 percent despite concerns about food and energy prices,” Peterson concluded. “Consumers’ Perceived Likelihood of a U.S. Recession over the next 12 Months rose slightly in April but is still well below the May 2023 peak.”
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