US Consumer Confidence Drops to Lowest Since July Amid Economic Pessimism

US consumer confidence has dropped to the lowest level since July, according to data released by the Conference Board. The group’s index fell to 101.3 in April from 104 in March, while economists had forecast a reading of 104.

The decrease was largely due to a more pessimistic view of the economic outlook, with consumers expressing concerns about business conditions and labor markets in the coming months. The group’s measure of expectations for the six-month outlook fell to 68.1, also the lowest since July, while the gauge of current conditions increased to 151.1.

Consumers Fear Recession Looming

The figures suggest that consumers are becoming increasingly pessimistic about the economy amid expectations that the labor market will begin to soften soon. Layoffs are swirling, and companies are posting fewer job openings, with trends expected to accelerate in the event of a recession. While more consumers said jobs were “plentiful” in April and fewer reported that jobs were hard to get, their expectations for the next six months deteriorated. Only 12.5% of consumers expected more jobs to be available in the coming months, the lowest in nearly seven years.

Buying Plans Fall

As a result of this increased economic uncertainty, buying plans for cars, homes, and major appliances all fell, with fewer consumers intending to take a vacation in the next six months. Inflation is still widespread and running well above the Federal Reserve’s target, and financial stress from several bank failures is making it harder for consumers to get loans, which could depress spending and sentiment further.

Mixed Economic Signals

A separate report from the Commerce Department showed sales of new US homes increased in March to the highest level in a year, suggesting an easing in mortgage rates is helping the housing market find some footing. However, the median inflation rate seen over the next 12 months edged lower, according to the Conference Board, while data expected on Friday is anticipated to show the Fed’s preferred core inflation metrics continued to rise at a solid clip last month.

Expert Opinions

Stephen Stanley, the chief US economist at Santander US Capital Markets LLC, said that respondents “like what they are currently seeing and think that their own finances will be OK but have a generalized concern that the broader economy may weaken…That seems better than if they were seeing actual negative developments or were worried about their own finances.”

Meanwhile, Eliza Winger, an economist at Bloomberg Economics, suggested that April’s drop in consumer confidence could be “an initial response to a tighter supply of credit, a consequence of recent banking turmoil that’s adding to economic headwinds.”

Conclusion

The drop in US consumer confidence suggests that consumers are becoming increasingly pessimistic about the economy amid concerns over business conditions and labor markets in the coming months. This pessimism is likely to have a knock-on effect on spending and sentiment, which could further depress the economy. While some economic indicators, such as sales of new homes, have increased, inflation is still high and running above the Federal Reserve’s target, while financial stress from bank failures is making it harder for consumers to get loans.