Consumer confidence in the United States experienced a dramatic downturn in February, marking the largest decline in more than a year. The consumer confidence index fell sharply to 98.3 from 105.3 in January, significantly below economists' expectations of 103. This seven-point drop represents the biggest month-to-month decline since August 2021, highlighting growing concerns about the economic landscape and consumer sentiment.
The implications of this decline are widespread. The S&P 500 index saw a decrease of 0.7%, while the Dow Jones Industrial Average slid by 1.7%. Similarly, the Nasdaq faced a decline of 1.4% during the same period. These market responses underscore the ripple effects that declining consumer confidence can have on financial markets and investor attitudes.
Retail sales also felt the impact, dropping 0.9% last month compared to December. Given that consumer spending constitutes about two-thirds of U.S. economic activity, this decline poses significant concerns for economic growth and stability. The proportion of consumers anticipating a recession over the next year has surged to a nine-month high, adding to the growing unease.
The Conference Board reported that consumers' view of current conditions decreased by 3.4 points, reaching a reading of 136.5. Additionally, their assessment of current labor market conditions weakened, contributing to the overall decline in confidence.
"Views of current labor market conditions weakened,"
- The Conference Board
Furthermore, short-term expectations for income, business, and the job market fell by 9.3 points to 72.9. According to the Conference Board, a reading under 80 often signals a potential recession in the near future, raising alarms among economists and policymakers alike.