U.S. Consumer Confidence Plummets in February; Inflation Expectations Surge

The Conference Board's Index of Consumer Confidence fell 6.6% (-6.2% y/y) during February to 98.3. A reading of 102.8 had been expected in the Action Economics Forecast Survey. The decline followed a 3.8% January drop, revised from a 4.9% fall. The 12.9% confidence decline during the last three months is the largest since October 2023.

Both components of the index fell sharply this month. The Expectations Index slumped 11.3% (-4.5% y/y) after a 5.0% January shortfall, revised from a 3.0% decline, after falling 7.7% in December. The Present Situation index fell 2.4% (-7.5% y/y) in February after a 2.8% January fall, revised from -6.7%, and a 1.8% December rise.

The percentage of respondents assessing business conditions as “good” rose to 19.6% this month after declining to 18.5% in January. The percentage assessing conditions as “bad” edged up to 15.7% after easing to 15.2% in January. The appraisal of labor market conditions deteriorated in February as 33.4% of respondents thought jobs were plentiful, down from 42.8% one year earlier. Jobs were viewed as hard to get by 16.3% of respondents this month, up from 14.5% in January. This measure has risen steadily from 11.0% in January 2024. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) fell to 17.1% and remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions worsened in February. A lessened 20.2% of respondents expect conditions to improve over the next six months, down from 20.8% in January and 22.7% in December, while a higher 26.7% expect them to deteriorate, up from 19.6% in January. On employment, a lessened 18.4% expect the number of jobs to increase over the next six months. An increased 25.9% of respondents expect the number of jobs to decline. A steady 18.2% expect income to increase in six months. That remained down from 20.7% in November and compares to a raised 13.7% who expect income to decrease.

The expected rate of price inflation over the next twelve months rose to 6.0% in February from 5.2% in January. Interest rates are expected to rise this year by 51.7% of respondents, up from 49.4% in January. The percentage of respondents expecting equity prices to increase over the next twelve months fell to 46.8% from 54.2% in January, while the percentage expecting a decline in stock prices increased to 32.8% from 24.8% in January.

The percentage of respondents planning to buy a home rose in February to 5.6% from 5.0% in January. Plans to purchase an automobile eased to 11.1% this month from 11.4% in January.

The Consumer Confidence data are available in Haver’s CBDB database. The total indexes, which are indexed to 1985=100, appear in USECON, and market expectations are in AS1REPNA.