Index Erases Early Summer Gains, as Hot Labor Market Cools and High Interest Rates Bite

The Conference Board Consumer Confidence Index® declined in August to 106.1 (1985=100), from a downwardly revised 114.0 in July. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell to 144.8 (1985=100) from 153.0. The Expectations Index— based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 80.2 (1985=100) in August, reversing July’s sharp uptick to 88.0. Expectations were a hair above 80—the level that historically signals a recession within the next year. Although consumer fears of an impending recession continued to recede, we still anticipate one is likely before yearend.

“Consumer confidence fell in August 2023, erasing back-to-back increases in June and July,” said Dana Peterson, Chief Economist at The Conference Board. “August’s disappointing headline number reflected dips in both the current conditions and expectations indexes. Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular. The pullback in consumer confidence was evident across all age groups—and most notable among consumers with household incomes of $100,000 or more, as well as those earning less than $50,000. Confidence held relatively steady for consumers with incomes between $50,000 and $99,999.”

Peterson added: “Assessments of the present situation dipped in August on receding optimism around employment conditions: fewer consumers said jobs are “plentiful” and more said jobs are “hard to get.” Hard data confirm that employment gains have slowed, overall wage increases are less generous compared to a year ago, and the average number of weeks of unemployment is ticking upward. Business conditions in August were little changed from July, but still somewhat lower than in June. When asked about current family financial conditions (a measure not included in calculating the Present Situation Index), the share of respondents citing a “good” situation fell, and those citing “bad” conditions rose, signaling concerns about family finances presently.”

“Expectations for the next six months tumbled back near the recession threshold of 80, reflecting less confidence about future business conditions, job availability, and incomes. Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to rise—making big-ticket items more expensive. Notably, expectations for interest rates jumped in August after falling two months ago. Also, the outlook for stock prices fell and average 12-month inflation expectations ticked up. The measure of expected family financial situation, six months hence (not included in the Expectations Index) softened further.”

“The proportion of consumers saying recession is ‘somewhat’ or ‘very likely’ ticked down again in August but remain elevated at 69.0%. These soundings likely reflect ongoing uncertainty given mixed buying plans. On a six-month moving average basis, plans to purchase autos and appliances continued to trend upward but plans to buy homes—more in line with rising interest rates—continued to trend downward. The dip in overall confidence notwithstanding, consumer plans to go on vacation, especially abroad, leapt upward in the month and slightly exceeded August 2022 readings, suggesting a continued penchant for spending on services.”

Present Situation

Consumers’ assessment of current business conditions was slightly less positive in August.

• 20.7% of consumers said business conditions were “good,” unchanged from July.
• 17.2% said business conditions were “bad,” up from 16.2%.

Consumers’ appraisal of the labor market deteriorated in August.

• 40.3% of consumers said jobs were “plentiful,” down from 43.7% in July.
• 14.1% of consumers said jobs were “hard to get,” up from 11.3%.

Expectations Six Months Hence

Consumers were less optimistic about the short-term business conditions outlook in August.

• 16.2% of consumers expect business conditions to improve, down from 17.2% in July.
• Meanwhile, 16.8% expect business conditions to worsen, up from 14.5%.

Consumers’ assessment of the short-term labor market outlook was less favorable in August.

• 16.7% of consumers expect more jobs to be available, down slightly from 16.6% in July.
• 18.0% anticipate fewer jobs, up from 15.6%.

Consumers’ short-term income prospects worsened in August.

• 16.5% of consumers expect their incomes to increase, down from 17.8% in July.
• 12.4% expect their incomes will decrease, up from 9.9%.

Consumers’ assessment of their Family’s Current Financial Situation turned less positive in August.

Consumers’ assessment of their Family’s Expected Financial Situation, Six Months Hence softened in August.

Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months ticked down in August to the lowest level recorded thus far in 2023.

The monthly Consumer Confidence Survey®, based on an online sample, is conducted for The Conference Board by Toluna, a technology company that delivers real-time consumer insights and market research through its innovative technology, expertise, and panel of over 36 million consumers. The cutoff date for the preliminary results was August 20.