According to the latest Consumer Confidence Index from The Conference Board, February saw the largest monthly decline in U.S. consumer confidence since August 2021. It also marked the third consecutive month-on-month decline.
The study examines perceptions about current business and labor market conditions (with positive sentiments down 3.4 points) and the short-term outlook for income and business (which dropped 9.3 points, below a threshold that usually signals an upcoming recession). Declining confidence was common across all age groups — but worst for the 35-55 age range — and income levels, with the exception of households earning less than $15,000 per year and between $100,000-$125,000 annually.
Our Analysis: Ongoing Uncertainty May Mean Fewer Travel Bookings
Consumers have a lot of concerns right now; write-in responses included many mentions of ongoing inflation and the rising price of household items (such as eggs), as well as increased comments about trade, tariffs and the current presidential administration’s policies.
And all this instability is already affecting the outlook for travel. The index found that while consumers still intend to make non-essential purchases, their priorities have shifted away from travel, with vacation plans trending downward. If this uncertainty about income, jobs and prices continues, travel planners and suppliers may soon see a slowdown in bookings that they should start preparing for now.
Fast Facts: Consumers Are Expecting a Recession, Decreased Income and More
- The Index found that the proportion of consumers anticipating a recession within the next year increased to the highest level in nine months.
- About 47% of consumers expect stock prices to increase over the next year, down from 54% in January. Nearly 33% expect prices to decline, compared to 25% in January.
- More than half of consumers expect higher interest rates in the next 12 months.
- Plans for purchasing homes made some recovery, though plans for buying cars and big-ticket items were down.
- As vacation plans trend downward, discretionary spending priorities have shifted to personal and health care, as well as movies and live entertainment.
- Consumers were less optimistic about their income prospects in February than in January; 18.2% expect an increase in income (compared to 18.1%) and 13.7% anticipate a decrease in income (up from 12.3%).
What They Are Saying: Pessimism About Future Business Conditions Is on the Rise
“Of the five components of the Index, only consumers’ assessment of present business conditions improved, albeit slightly,” said Stephanie Guichard, senior economist, global indicators at The Conference Board. “Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a 10-month high.”
Regarding the factors affecting consumers’ outlook, Guichard added: “References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted toward other topics. There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current administration and its policies dominated the responses.”
