U.S. consumer confidence declined for a second month amid data showing that home price growth is slowing as recession fears persist.
- U.S. consumers have lowered expectations for labor and business markets, reporting confidence levels that would typically signal an imminent recession.
- Consumers are holding off on major purchases, like homes or automobiles, over fears of a weaker market.
- Home prices fell in December, signaling market readjustment after record growth in 2021.
The Conference Board's Consumer Confidence Index dropped 2.9 percent in February from the previous month. The Expectations Index, based on consumers' short-term outlook for income and business, fell 8.3 percent to 69.7, more than 10 points below 80, the level that tends to signal a recession within the next year. The index has been below 80 for 11 of the past 12 months.
“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.
Overall, 17.8% of consumers said in February that business conditions were “good,” down from 19.9% in January.
Consumers grew more pessimistic about the short-term business conditions in February, with 14.2% of people expecting them to improve, down from 18.4% who said the same in January.
Americans also are expecting their incomes to increase at a slower rate, according to the data. Only 13.4% of consumers are expecting short-term boosts, down from 17.4% in January. Some 52%, said jobs were “plentiful,” up from 48.1% in January, while 10.5% of consumers described jobs as “hard to get,” down from 11.1% in January.
“While 12-month inflation expectations improved—falling to 6.3 percent from 6.7 percent last month—consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates,” Ozyildirim said. “Fewer consumers are planning to purchase homes or autos and they also appear to be scaling back plans to buy major appliances. Vacation intentions also declined in February.”
Lower consumer confidence is also reflected in the housing market,as higher mortgage rates weigh on sales, and price growth slowed, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
Home prices rose 5.8% in December, according to the index, down from a pace of 7.6% the previous month.
The 10-city composite, which includes New York and Los Angeles, was up 4.4% in December from a year earlier, down from 6.3% in November. The 20-city composite, which includes Seattle and Dallas, rose 4.6% year-over-year in December, down from a pace of 6.8% in November.
“The cooling in home prices that began in June 2022 continued through yearend, as December marked the sixth consecutive month of declines for our National Composite Index,” said Craig J. Lazzara, managing director at S&P DJI.