Happening at the same time the nation’s Gross Domestic Product growth rate fell by over 50% in the first quarter of 2024 compared to that of Q4 2023, the data – even though subjective – could point to a recession ahead if the trend continues.
The information comes from The Conference Board, a global data analytics institution with headquarters in New York City and branch offices in Brussels, Kuwait, Singapore, Hong Kong, and Beijing. It focuses on economic projections and business guidance based on survey data from business leaders, consumers, and tracking of specific economic trend data.
In the organization’s just released report, The Conference Board Consumer Confidence Index® (CCI), a measure of how consumers feel about their own specific economic situation and willingness to spend money, fell to 97.0 last month compared to March’s figure of 103.1.
As a benchmark, the CCI uses the value calculated for its survey in 1985 as equivalent to 100 on this same scale.
The cutoff date for the current batch of surveys was April 24, to ensure being able to provide a report on April 30.
The data this month for the CCI showed significant drops in the index for three months in a row. Numbers below 100 are considered “negative”, with trend trajectories telling more of the story typically than just the numbers alone.
The survey is based on surveys of 3,000 individuals and focuses on their specific situations at the time the information is gathered. It incorporates data gathered as part of its Present Situation Index® calculations, which cover consumer perceptions of current employment and hiring situations across the country, along with what consumers think of business conditions at this moment. It also considers the Expectations Index®, The Conference Board’s analysis of consumer’s expectations of business conditions, their own employment situation, and family income trend projects for six months from now.
The Present Situation Index information for April showed near-term optimism by consumers was still relatively strong, with a value of 142.9 , again relative to the same benchmark value of 100 for 1985. That is down from March’s recently updated value of 146.8 for how consumers feel about “now”. While that number is still positive, the drop of 3.9 points in just one month is considered important to track.
Balanced against that is the sharply downward shift in the already highly negative Expectations Index. That number dropped 7.6 data points from March’s 76.0 to 66.4 for April. Past historical data shows that when this value falls below 80 and stays there, it suggests a recession is ahead because consumers will begin holding back on longer-term purchases.
According to the survey firm’s Chief Economist, Dana M. Peterson, additional written comments from those polled helped tell part of the background story about why longer-term consumer expectations were sagging.
According to the information provided in those notes, “elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up,” Peterson explained.
Peterson also noted that even the Present Situation indicated areas of possible concern. While overall most survey respondents saw current business conditions as positive, they were already registering worry about the current hiring situation for their kinds of jobs. Less people this month – 40.2% in April versus 41.7% in March -- reported they thought “jobs are plentiful” now. There was also a corresponding and even more significant increase in the proportions saying they believe “jobs are hard to get”, from 12.2% of those polled in March to 14.9% for April.
There is also the criminal insanity exhibited by politicians in supporting Israel's genocide of Palestinians, the skyrocketing debt, rampant inflation, the climate crisis and lack of any type of political solution to America's woes that all weighs heavily on many Americans.
As for the six months’ ahead projections summarized in the Expectations Index, data was plentiful suggesting serious concerns about the direction of the economy later this year.
The report showed strongly negative trends regarding business conditions. Only 12.8% of consumers now believe business conditions are going to get better compared to 14.3% as of the end of March. A full 19.9% believe business conditions will get worse, up from 18.5%. The main positive about this second metric is that the numbers are still well below the 100 level, which suggests consumers are not likely to react quickly to their beliefs about bad news in business going forward.
Opinions about the employment outlook for the fall were also down in the detailed data analysis provided. The percentage of consumers who believe jobs will increase fell from 14.3% in March to 11.7% in April. The flip side of that question showed an increasing fraction of people believe there will be less new jobs as of this fall. That value rose to 19.6% of those polled in April compared to 18.8% a month ago.
Perspectives on consumer income also was down. Only 15.4% of respondents now believe their wages will go up by this fall, compared to a much higher 17.3% as of the end of March. The percentage of those who have a positive outlook on salary increases remained low though with a slight uptick, hitting 13.9% of the total compared to the previous value of 13.5%.
Other data regarding consumers’ opinions of their family situation, a factor not included in either the Present Situation or Expectations indices, were also down. The percentage of people feeling good about their current family finances fell 2 points from about 27 to 25 from March to April, and those feeling concerned about it increased. The expected financial situation of their family’s funds fell even faster, from almost 31 in March to just above 27 in April.
Those believing there could be a recession six months ago also climbed this time. It rose from around 65% for March to above 66% in April.
Further data showed how spending priorities for consumers may be affected by their opinions about the short-term direction of the economy. From the top down on those priority choices, 44.8% of those polled said they would be cutting back on food consumed in restaurants rather than from home, 31.5% said they would be cutting back on clothing and fashion purchases, 30.7% said they would be spending less on outside entertainment, 23.3% planned to spend lower amounts on vacations, and 20.3% -- over one fifth – are cutting back on grocery expenditures.
Purchases of high value items, such as new homes, automobiles, and appliances, were also on the list of items people would be spending less on as the year continues.
Only 18.5% of those polled plan to keep on spending as usual.
The main areas where consumers will give priority to spending increases if necessary are for education, healthcare, and other areas related to caring for their children.
While the data does not reveal all the concerns consumers may have that is turning forward-looking attitudes about the economy negative, one factor is inflation. The Consumer Price Index was up 0.4% in March, with overall inflation levels for the preceding twelve months still hovering at 3.5%. The so-called “core” inflation index, which does not include the often more fluctuating costs of energy and food, was up even more, at 3.8%.
Other factors affecting consumers’ purchasing habits and opinions are the seasonal uptick in gasoline prices, as the summer travel season grows closer. Higher-than-normal temperatures expected across the nation will also eat into available discretionary income as families have air conditioning on for longer-than-normal periods of time.
Also impacting what consumers may do is that, with inflation remaining far higher than the Federal Reserve Board’s target of 2% and concerns that stagflation may be overtaking the economy, the Fed may move slower on plans to cut prime bank lending rates than original expected as the year began.
The deteriorating consumer confidence numbers are of special concern for the economy, especially after the country’s GDP dropped so precipitously from Q4 2023 to Q1 2024. With consumer spending in the U.S. responsible for 68.2% of the GDP as of December 2023, the economy is heavily leveraged and dependent upon how much money consumers are willing to spend and on what items.
All this comes in addition to another concerning report about the economy just released yesterday. The Bureau of Labor Statistics (BLS) just reported that the cost of compensation – not to be confused with the actual rise in just salaries, but including the cost of capital involved and all benefits provided to employees – jumped by a surprising 1.2% for the three-month period ending March 2024. That puts the annualized rate of growth of the cost of compensation for all civilian workers in the country at 4.2%. Actual costs may be substantially higher. The BLS has been caught skewing data for political reasons before.
This number, considered atop an overall twelve-month actual wage increase of 4.4% for the last twelve months, means employers are themselves fighting an inflationary spiral of their own, as they do their best to keep their best employees by matching compensation in a still-hot labor market. While the impact of that spiral has not been fully felt by employers yet, economists expect employers to slowly ratchet back on further raises for their people over the coming months.
That plus reaching the lowest Consumer Confidence Index in almost two years does support estimates that at best GDP growth will remain lower in 2024 than it was in 2023. If something more serious were to happen, such as a major expansion of the war in the Middle East, or an oil price spike tied directly to that, it could push what currently are expected as slight cutbacks in consumer spending to something far more drastic.