February 27, 2024
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The Conference Board reported that consumer confidence fell 4.2 points in February to 106.7 after rising 2.9 points in January. This was the first decline after rising for three consecutive months..
Chief Economist at the Conference Board, Dana Peterson, said “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000. Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54. He added that, “February’s write-in responses revealed that while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months. But they are more concerned about the labor market situation and the US political environment.”
We envision moderate economic growth in the months ahead. The economy keeps cranking out new jobs which are showing few signs of slowing down very much With the funds rate at 5.5% and the core CPI at 3.9% the real funds rate is +1.6% which may be high enough to slow the pace of economic facticity. The bottom line is that the economy is likely to grow at roughly a 1.7% pace in both the first and second quarters. . Wages are growing steadily which is boosting consumer income. The Fed has boosted the funds rate from 0.0% to 5.5%, Given the magnitude of the earlier declines in confidence one might have expected a sharp pullback in consumer spending. But that has not happened. Instead, real consumer spending has risen 3.2% in the past year. While they say they are worried, consumers still have a job with little chance of losing it any time soon, and their balance sheets are the best they have been since the 1980’s so they keep spending.
Confidence data reported by the Conference Board are roughly matched by the University of Michigan’s series on consumer sentiment. As shown in the chart below, trends in the two series are identical but there can be month-to-month deviations.
Stephen Slifer
NumberNomics
Charleston, SC
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