U.S. consumer confidence rose to a six-month high in August amid rising concerns over the labor market’s conditions after unemployment rose to a three-year high last month.
The Conference Board‘s U.S. Consumer Confidence Index rose in August to 103.3, from an upwardly revised 101.9 in July. “Overall consumer confidence rose in August but remained within the narrow range that has prevailed over the past two years,” said Dana M. Peterson, chief economist at The Conference Board.
The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, improved to 134.4 from 133.1 in July. Meanwhile, the Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, also improved in August to 82.5.
“Consumers’ assessments of the current labor situation, while still positive, continued to weaken, and assessments of the labor market going forward were more pessimistic. This likely reflects the recent increase in unemployment,” added Peterson.
Confidence dips in younger consumers
In August, U.S. consumer confidence declined among consumers under 35 while it increased for those 35 and older. On a six-month moving average basis, confidence remained the highest among young consumers. Despite the overall improvement in the headline index, U.S. consumer confidence declined for consumers earning less than $25,000. On a six-month moving average basis, consumers earning over $100,000 remained the most confident.
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Stock market expectations
U.S. consumer confidence likely took a hit due to the financial market turmoil in early August. This month, 46.9 percent of consumers expected stock prices to increase over the year ahead, down from 50.6 percent in July. Meanwhile, 27.2 percent expected a decrease. August’s write-in responses also included more mentions of stock prices and unemployment as affecting consumers’ views of the U.S. economy.
However, consumers did not change their views about a possible recession. The proportion of consumers predicting a recession was stable and well below the 2023 peak. Average 12-month inflation expectations dropped to 4.9 percent in August, the lowest since March 2020 and consistent with slower overall inflation and declines in some goods prices.
Meanwhile, purchasing plans for homes fell to a new 12-year low, while buying plans for cars improved slightly.
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