Do Consumers Think the Economy Will Gain Momentum?

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With a sluggish economy and weak labor market, consumers are finding it difficult to have an upbeat outlook. In fact, consumer confidence recently suffered its worst decline in four months.

The Conference Board’s Consumer Confidence Index fell 1.3 percentage points to 78.1 in February compared to 79.4 in January. Economists expected the index to come in around 80. The lowest point for the index last year was 58 in January, while the highest point was reached in June, at 82.1. During the Great Recession, the index averaged a dismal 54.

“Consumer confidence declined moderately in February, on concern over the short-term outlook for business conditions, jobs, and earnings,” said Lynn Franco, director of Economic Indicators at the Conference Board, in a press release. “While expectations have fluctuated over recent months, current conditions have continued to trend upward and the Present Situation Index is now at its highest level in almost six years (April 2008, 81.9). This suggests that consumers believe the economy has improved, but they do not foresee it gaining considerable momentum in the months ahead.”

In February, the Present Situation Index jumped to 81.7 from 77.3, while the Expectations Index dropped to 75.7 from 80.8. The assessment of people claiming business conditions are “good” climbed higher, from 20.8 percent to 21.5 percent. The number of people saying business conditions are “bad” declined to 22.6 percent from 23.4 percent.

The percentage of consumers expecting business conditions to improve over the next six months decreased to 16.3 percent from 17 percent, while those anticipating business conditions to worsen increased to 13.3 percent from 12.2 percent. The outlook for the labor market also worsened. Those expecting more jobs in the months ahead declined to 13.3 percent from 15.1 percent, while those anticipating fewer jobs increased to 20.6 percent from 19 percent.

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