U.S. Consumer Confidence Hits Lowest Level Since July 2022

Consumer confidence fell sharply in April as inflation concerns and a poor labor market outlook pushed optimism to its lowest level since 2022.

The Conference Board’s consumer confidence index fell to 97 in April, below economists’ expectations of 104 and below March’s reading of 103.1.

“Consumers were less positive about the current labor market situation and more concerned about future business conditions, job availability and income,” Dana Peterson, chief economist at the Conference Board, said in a news release.

“According to responses submitted in April, increased price levels, particularly for food and gas, dominated consumer concerns, followed by politics and global conflicts.”

In addition to the confidence index, consumer expectations for the next six months also fell to their lowest level since July 2022.

The Conference Board argued that this was due to a more pessimistic outlook on “future business conditions, labor market conditions and income expectations.”

On a six-month basis, the Conference Board found that confidence among consumers earning less than $50.00 per year was “stable,” while confidence among those earning more was “moderated.”

“Even though consumer confidence has fallen to its second lowest level in three years, consumers appear to be in solid shape,” Tim Quinlan, senior economist at Wells Fargo, wrote in a research note on Tuesday.

“However, the still elevated cost of living combined with a job market that isn’t quite as hot as in 2021 and 2022 appears to be putting them in a bad mood.”

The decline in consumer confidence is also due to the fact that US economic data has become increasingly mixed.

Several months of inflation data are hotter than expected as price pressures prove more persistent than some policymakers and economists had expected.

On Friday, new data showed that the core personal consumption expenditures (PCE) index, which excludes food and energy costs and is closely watched by the Federal Reserve, rose 2.8% in March from a year earlier, above estimates of 2.7% is unchanged from the annual increase in February.

In the first three months of the year, core PCE rose at an annual rate of 4.4%, a “worrying” trend, according to Ben Ayers, senior economist at Nationwide. “High inflation readings through March should offset any rate cuts in the first half of 2024,” Ayers wrote in a note on Friday.

Fed Chairman Jerome Powell has indicated that recent inflation data did not show the progress in price increases the central bank had hoped for by 2024.

“We said at the FOMC that we need more confidence that inflation is moving toward 2% on a sustained basis before any policy easing would be appropriate,” Powell said on April 16, ahead of the release of March PCE data.

“The recent data clearly does not give us greater confidence, but instead suggests that it will likely take longer than expected for us to achieve that confidence.”

Meanwhile, economic growth was slower than expected in the first quarter.

The Bureau of Economic Analysis’s first-quarter estimate of U.S. gross domestic product (GDP) showed the economy grew 1.6% on an annual basis. During the period, it missed the 2.5% rate expected by economists surveyed by Bloomberg.

The figure was well below fourth-quarter GDP, which was revised to a rate of 3.4%.