Zinger Key Points
- Consumer confidence sharply declined in February, marking the third consecutive monthly drop.
- Optimism about the economy, job prospects and inflation expectations all worsened, with recession concerns rising.
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The Conference Board Consumer Confidence Index fell sharply in February, declining 7.0 points to 98.3, marking the steepest drop since August 2021. This is the third consecutive monthly decline, bringing the index to the lower end of its two-year range.
What To Know: The Conference Board Consumer Confidence Index is a widely watched economic indicator that measures consumer sentiment regarding the current and future state of the economy. It is based on a monthly survey of 5,000 households, assessing perceptions of business conditions, labor markets and personal finances.
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A decline in the index, like the one seen in February, often signals reduced consumer spending and growing concerns about economic conditions, which can influence both business decisions and market trends.
What’s Driving The Data: The Present Situation Index, reflecting current business and labor market conditions, dipped to 136.5, while the Expectations Index plunged to 72.9—below the critical recession-signaling threshold of 80 for the first time since mid-2024.
Consumers' confidence in future economic conditions weakened significantly. Optimism about income, business conditions, and job prospects declined, with pessimism about employment prospects reaching a 10-month high. Confidence fell across all age groups, with the most pronounced decline among those aged 35 to 55.
The downturn was also widespread across income levels, except for the lowest earners and those making between $100,000 and $125,000 annually.
Inflation expectations surged to 6%, driven by price increases in essentials like eggs and concerns over tariffs. Consumers’ recession expectations rose to a nine-month high, while stock market optimism dropped, with only 46.8% expecting gains—down from 54.2% in January. Also of note – more than half of consumers anticipated higher interest rates ahead.
Expert Commentary: Jeffrey Roach, Chief Economist at LPL Financial, noted that while current conditions remain positive, the outlook for the future has worsened for the third straight month. Consumers are increasingly concerned about the impact of tariffs and rising prices, though more are planning home purchases in anticipation of lower mortgage rates.
Roach also observed a softening labor market, with more consumers perceiving jobs as harder to find. Despite these shifts, he cautioned that consumer confidence surveys are volatile and unlikely to influence the Federal Reserve’s near-term monetary policy decisions.
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