Consumer confidence fell sharply in April as inflation concerns and a poor outlook for the labor market pushed optimism to the lowest level since 2022.
The Conference Board’s consumer confidence index fell to 97 in April, below economists’ expectations of 104 and lower than March’s reading of 103.1.
“Consumers became less positive about the current labor market situation and more concerned about future business conditions, job availability and income,” Dana Peterson, chief economist at the Conference Board, said in a statement.
“According to April’s written responses, elevated price levels, particularly for food and gas, dominated consumer concerns, with politics and global conflict far ahead.”
In addition to the confidence index, consumer expectations for the next six months also fell to the lowest level since July 2022.
The Conference Board reasoned that this was driven by a more pessimistic outlook on “future business conditions, labor market conditions and income expectations.”
On a six-month basis, the Conference Board noted that confidence among consumers earning less than $50.00 a year has been “stable,” while confidence among those earning more has “weakened.”
“Even as consumer confidence fell to its second-lowest level over the past three years, consumers appear to be in a solid place,” Wells Fargo senior economist Tim Quinlan wrote in a research note on Tuesday.
“However, a still high cost of living combined with a labor market that is not quite as hot as it was in 2021 and 2022 seems to be leaving them in a sour mood.”
The drop in consumer confidence also comes as US economic data has become increasingly mixed.
Several months of inflation data have come in hotter than expected as price pressures turn out to be more persistent than some policymakers and economists had expected.
On Friday, new data showed that the core personal consumption expenditures (PCE) index, which strips out food and energy costs and is closely watched by the Federal Reserve, rose 2.8% from a year earlier in March, above estimates for 2.7% and unchanged from the annual increase in February.
Through the first three months of the year, core PCE rose at an annual pace of 4.4%, a “concerning” trend, according to Nationwide senior economist Ben Ayers. “The warm inflation readings through March should write off any rate cuts in the first half of 2024,” Ayers wrote in a note Friday.
Fed Chairman Jerome Powell has noted that recent inflation data have not shown the progress in price increases that the central bank had hoped to see entering 2024.
“We have said at the FOMC that we need greater confidence that inflation is moving sustainably toward 2% before it would be appropriate to ease policy,” Powell said on April 16, ahead of the release of the March PCE- the data.
“Clearly the latest data has not given us greater confidence and instead indicates that it will likely take longer than expected to gain that confidence.”
Meanwhile, economic growth in the first quarter came in slower than expected.
The Bureau of Economic Analysis advance estimate of US gross domestic product (GDP) in the first quarter showed the economy grew at an annualized rate of 1.6% in the period, missing the 2.5% rate economists surveyed by Bloomberg reported.
The reading came in significantly lower than fourth-quarter GDP, which was revised to a 3.4% rate.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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