Consumer sentiment inched up in August, reflecting a mix of optimism and caution as Americans weigh the economic outlook against concerns over job stability.
The Conference Board’s consumer confidence index ticked up to 103.3, building on July’s upward revision to 101.9 from 100.3.
Both present and future outlooks improved, though with a cautious tone.
“Consumers continued to express mixed feelings in August,” said Dana Peterson, chief economist at the Conference Board.
“Compared to July, they were more positive about business conditions, both current and future, but also more concerned about the labor market.”
This unease, Peterson noted, likely stems from the recent rise in unemployment.
The report arrives as the Federal Reserve gears up to potentially lower interest rates next month, just as the 2024 presidential race intensifies, with candidates zeroing in on the economy with sharply different strategies.
Confidence levels vary widely by age and income.
“In August, confidence declined among consumers under 35 while it increased for those 35 and older,” Peterson explained.
“Despite the overall improvement in the headline index, confidence declined for consumers earning less than $25K.
On a six-month moving average basis, consumers earning over $100K remained the most confident.”
Inflation concerns, while easing slightly, still loom large.
Consumers expect prices to rise at a 4.9% pace over the next year—down from the pandemic highs but still above current inflation levels.
Interestingly, despite the nation’s polarized political climate, consumer views on the 2024 election’s economic impact have stabilized, holding just above 2020 levels but well below the intense pre-election concerns of 2016.
EY Chief Economist Gregory Daco observed that early August stock market volatility hasn’t spooked consumers.
“Business leaders and consumers are not retrenching, and financial market volatility is more a reflection of the Federal Reserve being behind the curve in terms of easing policy than reflective of any fundamental economic weakness,” Daco said.
Looking ahead, Daco expects the Fed’s anticipated policy easing to bolster the economy and calm market fluctuations.
He projects GDP growth at 2.5% for 2024, slowing to 1.7% in 2025.
Meanwhile, the housing market remains a mixed bag.
The S&P CoreLogic Case-Shiller national home price index hit a new peak in June with a 5.4% annual rise, though it’s slightly down from May’s 5.9%.
New York led with a 9% year-over-year gain, followed by San Diego and Las Vegas.
Realtor.com’s Chief Economist Danielle Hale anticipates a cooling in home price growth, forecasting a 4.6% rise for 2024.
“In fact, the Realtor.com 2024 forecast update projects growth of just 4.6% for the year,” Hale said.
“Even though the number of homes on the market for sale trails 2017 to 2019 levels by 30%, the number of home sales has remained quite low.”
As 2024 approaches, consumers are navigating a landscape of cautious optimism, with their eyes fixed on the evolving economic and political horizon.
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