The Conference Board has officially published its most recent discoveries into the US Consumer Confidence Index. It released a modest decline to 97.4 for August. That’s down from the revised 98.7 in July. The monthly index, which serves as an indicator of consumer sentiment regarding economic conditions, reflects consumers’ willingness to spend money, a crucial component driving the US economy.
The Consumer Confidence Index is derived from a comprehensive survey that gathers insights on consumer behavior, expectations, purchasing intentions, and vacation plans. Along with business investment, consumer spending is always the most important driver of our economy. Changes in this index provide important perspectives on the state of business today and what lies ahead over the next few months.
Additionally, in June the index decreased to 95.2 and in July the Present Index Situation decreased to 131.5. The Expectations Index experienced a slight bump up to 74.4 in the same month. The Conference Board’s data provides a snapshot of consumer attitudes and helps predict future economic activity.
Insights from the Conference Board
The Conference Board, an influential research organization, conducts this essential monthly survey to inform stakeholders about consumer sentiment and spending intentions. Their data illustrates that even minor changes in consumer confidence can have major repercussions for economic expansion.
In August, the US Consumer Confidence Index showed a slight decrease from the month before. This shift is an early warning sign that consumers are becoming more apprehensive about their fiscal future and cut back on discretionary spending. Those surveyed represent an early signal of a move toward more fiscally conservative spending, which would have ripple effects throughout nearly every sector of the economy.
“Momentum indicators are also softening, as the Relative Strength Index (RSI) has eased to nearly 46, suggesting waning bullish momentum, while the Average Directional Index (ADX) is holding near 13, signalling a lack of strong directional trend” – Pablo Piovano.
Policymakers and economists take the index findings as gospel. Findings from this high-frequency data are key for tracking consumer spending, which is driving economic forecasting into uncharted territory. As consumer spending accounts for most Gross Domestic Product (GDP), this translates into a roaring consumer. Consequently, shifts in consumer sentiment can have a profound effect on the market and guide the business direction.
The Role of Consumer Spending
Though consumer spending is a critical driver of the US economy, making up about two-thirds of GDP, it’s no wonder that predicting and understanding changes in consumer confidence is the Holy Grail for business leaders and economic analysts. The recent decline in the Consumer Confidence Index may indicate that consumers are adopting a more cautious approach to spending amid ongoing economic uncertainties.
This concern for what’s around the corner is evident in the most recent index numbers. The decline from 98.7 in July to 97.4 in August suggests that consumers may be weighing their financial decisions more carefully. This hesitance can be felt across all sectors, especially for industries that depend on discretionary spending.
The Conference Board’s recent findings illustrate just how fundamental consumer expectations are in determining economic fortunes. As households calculate their current economic situation and outlook, consumer spending will naturally shift with them.
Future Outlook
Looking forward, most analysts expect continued ups and downs in the Consumer Confidence Index as we come to terms with the current state of our economy. As it stands, the Conference Board’s disappointing forecast calls for the index to fall even more—to 96.4 in September. This expected drop highlights the need for continued economic analysis and tracking of consumer sentiment.
As businesses adjust to the changes brought on by the pandemic, grasping a clear picture of consumer behavior will be key to smart strategic planning and decision-making. Businesses should be prepared to recalibrate their marketing and sales approach as consumer confidence starts to wane.