The economy may not be in such good shape despite record low levels of unemployment, February’s Consumer Confidence Index published by The Conference Board revealed on Tuesday.
The index, which measures how optimistic consumers are about their finances, dropped by nearly seven points from January to a three-month low in February and is down for the second consecutive month. Higher index values mean consumers are more optimistic.
“The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozyildirim, senior director of economics at The Conference Board, a non-partisan member-based think tank.
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Researchers at The Conference Board attributed February’s decline to growing fears of a recession. The board’s expectations index, a measure of how consumers feel about the health of the economy in the next six months, fell to a seven-month low of 67.9 from 76.
Readings below 80 often signal a recession within the next year, the board said. That index has been below that level for nearly a year even as the economy expanded.
However, consumers feel relatively good about their current financial situations, a third Conference Board index found. That’s a reflection of consumers’ “more favorable view of the availability of jobs,” Ozyildirim said.
A majority of consumers, 52%, said jobs are plentiful compared to 48% last month.
Inflation expectations
Consumers believe prices will rise by 6.3% over the next year, a decline from 6.7% last month. Annual inflation currently hovers at 6.4%, according to January’s consumer price index.
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Consumer spending
Consumers are “showing early signs of pulling back spending in the face of high prices and rising interest rates,” Ozyildirim said. That’s another warning sign that a recession may be imminent. When consumers cut back on spending it often causes employers to lay off workers.
The Federal Reserve’s campaign to fight inflation by raising interest rates has made it more expensive to purchase homes, cars and other big-ticket items like vacations that consumers pay for with credit cards.
Stock market today
Stocks were mixed Tuesday afternoon. The Dow Jones Industrial Average was down by over 100 points while the S&P 500 and Nasdaq Composite were up slightly. Last week was the worst week for stocks this year.
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here
