Covid Concerns and Rising Prices Drag Consumer Confidence Down in August

The Consumer Confidence Index from The Conference Board fell in August, dropping 11.3 points to 113.8. August was the second decline in a row and puts the index at its lowest level since February 2021 (see first chart).

Both major components of the index fell for the month. The present-situation component decreased 9.9 points to 147.3, the lowest since April, while the expectations component lost 12.4 points, taking it to 91.4, the lowest since January (see first chart). The details of the report suggest that consumers are becoming more concerned about the rising number of Covid cases and, to a lesser extent, rising prices.

According to the report, “Spending intentions for homes, autos, and major appliances all cooled somewhat; however, the percentage of consumers intending to take a vacation in the next six months continued to climb.” However, the report adds, “While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead.”

The most significant declines in the details of the survey came from views of current and future business conditions as well as expectations for income. Regarding current general business conditions, the percentage of consumers saying present business conditions were good fell 4.7 points to 19.9 while the percentage of those saying business conditions were bad rose 4.0 percentage points to 24.0. Those results left the net business conditions percentage at -4.1, down 8.7 from the prior month (see top of second chart).

Regarding consumer expectations, consumers’ expectations for business conditions in six months, the percentage expecting better conditions fell 8.0 points to 22.9 while the net percentage expecting worse conditions rose 5.9 points to 17.8. The net percentage for business conditions six months ahead was down 13.9 points to 5.1 (see bottom of second chart).

Expectations for future income deteriorated with 17.9 percent expecting an increase, down from 20.0 in July, while 10.1 percent expect a decrease, up from 8.8 in July. Those results put the net percentage at 7.8 percent, down 3.4 points from 11.2 in July (see bottom of second chart). As noted earlier, future buying plans softened as percentages for buying a home, auto, or major appliance all fell in the latest month though the percentage planning a vacation rose.

Overall, the survey results suggest consumers are growing more concerned about the recent surge in new Covid cases. It’s too soon to know whether the rising pessimism will impact spending, but the results add to the growing list of risks to the economic outlook.

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