Consumer confidence has fallen in February for the second month in a row, according to a report conducted by the Conference Board. In February, the consumer confidence index fell from 111.11 to 110.5 — just a small drop. However, this comes after January also experienced a drop in confidence, a drop which many analysts forecasted could mean there was now a downward trend in consumer confidence. This latest index reporting could confirm this.
Consumer confidence has likely fallen because of continued fears of high inflation and the price of goods surging. While confidence has dropped yet again, this new report does reveal certain positive data. For example, the present situation index, which measures current economic conditions, rose to 145.1. In January, this reading stood at 144.5. This likely means that while the economy is expanding in the first quarter, it isn’t gaining momentum, and consumers are not optimistic about the short-term economy, even if it is expanding.
Earlier this year, economists were optimistic about consumer sentiment, even if it was falling, as many consumers still remained positive about where the economy was headed. For example, consumers previously had plans to buy large items (such as cars or other large investments) in about six months, which meant that consumers were wary about their current situation, but positive that things would be better in six months’ time.
This has since changed, according to this new Conference Board data. The number of consumers looking forward to buying large items in six months has fallen. This could mean that consumers are not as optimistic about the economy — or where the economy is headed. However, it doesn’t look like consumers believe the economy will get any worse. They just believe the same problems they are facing will continue in six months’ time.
With this new data, economists are forecasting that the first half of 2022 will likely experience a moderation of growth. Much like the beginning of the year, the economy could continue to expand, yet not gain momentum as it did in 2021. Of course, things could always change. If inflation does moderate later on in the year, as some analysts foresee, then this could help improve consumer sentiment in the coming months.
Economists analyze consumer sentiment to understand better where the economy is headed. If consumer sentiment continues to drop, then this may mean that consumers will stop readily buying certain things — mainly big items such as cars, or spending money on vacation. Certain areas of the economy could falter, as a result.
The main reason consumer sentiment has fallen for the past two months is inflation, though many other problems still likely factor in. Tensions between the United States and Russia, the ongoing supply chain problems, and the continuous pandemic could all have a hand in how consumers feel about spending money, and about the economy. Inflation, though, remains the number one worry for many consumers.
When it comes to high inflation, analysts are split on when, exactly, this will cease being a problem for Americans. However, many do feel that it could start to moderate sometime towards the middle to end of 2022.
