US consumer confidence has plunged to its lowest level since July 2022, driven by persistent inflation concerns and a gloomy job market outlook.
The Conference Board reported that its consumer confidence index fell to 97 in April, missing economists’ expectations of 104 and dropping from March’s figure of 103.1.
Dana Peterson, the chief economist at the Conference Board, noted a shift in consumer sentiment, stating, “Consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income.”
She added that the primary worries highlighted in April’s responses were high prices for food and gas, with political issues and global conflicts also causing concern.
Additionally, the Conference Board observed a decline in consumer expectations for the next six months, marking the lowest sentiment since July 2022. This pessimism is attributed to negative forecasts for future business conditions, labor market situations, and income prospects.
The report further highlighted that while consumer confidence among those earning less than $50,000 per year has remained stable, it has weakened among higher earners.
Despite this downturn, Tim Quinlan, a senior economist at Wells Fargo, suggests that consumers are still fundamentally sound, although the high cost of living and a cooling labor market have dampened spirits.
“Even as consumer confidence dropped to its second-lowest level over the past three years, consumers look to be in a solid place,” he commented.
Inflation Trends and Economic Slowdown Undermine Policy Goals
This drop in consumer confidence coincides with increasingly mixed signals from the U.S. economy. Recent months have seen inflation figures exceed expectations, indicating persistent price pressures that have surprised some policymakers and economists.
Particularly telling was the latest core Personal Consumption Expenditures (PCE) index data, a measure excluding food and energy costs and closely monitored by the Federal Reserve. It showed a year-over-year increase of 2.8% in March, slightly above the forecasted 2.7% and consistent with February’s rise. Over the first quarter, the core PCE index grew at an annualized rate of 4.4%, which Ben Ayers, a senior economist at Nationwide, described as “concerning.”
Following these figures, Jerome Powell, the Fed Chair, remarked on the challenges of reigning in inflation to the central bank’s target of 2%. He expressed the need for greater confidence that inflation is sustainably moving toward this goal before considering any policy easing.
“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell noted.
Moreover, the U.S. economic growth for the first quarter was slower than expected. The Bureau of Economic Analysis’s preliminary estimate showed that GDP grew at an annualized rate of 1.6%, well below the 2.5% expected by economists and a sharp decline from the 3.4% growth rate recorded in the fourth quarter.
These developments underscore the challenges facing U.S. economic policymakers as they navigate persistent inflation and its impacts on consumer confidence and overall economic stability.
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