Consumer Confidence Torn Between Today and Tomorrow

By SBE Council at 27 March, 2024, 6:45 am

by Raymond J. Keating -

Given that consumption is the endpoint of the economic process, if you will, it obviously pays to keep an eye on what consumers are thinking, as well as doing.

In terms of consumer confidence, the latest read from The Conference Board pointed to overall confidence essentially being unchanged in March - with the index moving down slightly from 104.8 in February to 104.7 in March.

But consumers apparently are torn, with increasing confidence on what's happening now and less confident about what they see six months down the road.

As reported:

"The Present Situation Index-based on consumers' assessment of current business and labor market conditions-increased to 151.0 (1985=100) in March from 147.6 in February. Meanwhile, the Expectations Index-based on consumers' short-term outlook for income, business, and labor market conditions-fell to 73.8 (1985=100), down from 76.3 last month."

The kicker? "An Expectations Index reading below 80 often signals a forthcoming recession." As noted in the following chart from The Conference Board, consumers have been worried intermittently about a recession for a while now.

It was explained: "Assessments of the present situation improved in March, primarily driven by more positive views of the current employment situation… However, expectations for the next six months slipped to the lowest level since October 2023. Consumers' outlook for future business conditions, labor market conditions, and income expectations all deteriorated in March."

But - and this a big, hopeful "but" - the perceived likelihood of recession, while still high, has been moving in the right direction. Again, see the following chart from The Conference Board.

Whenever I take a look at measures of confidence or attitudes, it pays to keep in mind that what consumers say and what they do sometimes diverge. For example, growth in real personal consumption expenditures in the GDP data have been solid in three of the last four quarters.

In the end, though, whether we're heading into a recession or not, serious concerns and shortcomings are evident in the U.S. economy, as I recently explained, and few policymakers seem to be serious about implementing a true pro-growth, pro-entrepreneurship, pro-investment agenda.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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