Weak Confidence Has Silver Lining

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Household confidence weakened noticeably in February, but an encouraging sign for the near-term spending outlook is that confidence in current conditions is holding up, according to a first look at the latest U.S. confidence measures.

When confidence in current or present conditions is sustained, then spending trends tend to be sustained—especially among lower income households.

Most of the letup in confidence has instead been focused in future expectations, which likely reflects a lagging response to the early-year falloff in the stock markets. These wealth effects are likely chilling the outlook among upper-income households, especially for the long term.

The letup in confidence has been most evident in the consumer confidence index and especially in the month-to-month change from January.

See the table summary for more detail.

Impact @Work: The letup in confidence will temper the spending plans of upper-income households most of all. Spending plans among lower-income households are likely to hold up as long as job market gains persist as expected.

For more on confidence trends and the outlook for 2016, see the article here.

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