Consumers Remained Cautiously Optimistic in February – Robert Hughes (02/26/2021)

The Consumer Confidence Index from The Conference Board rose in February, increasing by 2.4 points to 91.3. The index is constructed so that it equals 100 in 1985. Overall consumer confidence has been trending flat over the last eight months, well below the pre-pandemic level but well above the lows of the last recession (see first chart).

The two major components of the index had somewhat offsetting performances for the month though the gain in current conditions was slightly stronger than the decline in expectations. The present-situation component rose 6.5 points to 92.0 while the expectations component fell 0.4 points, taking it to 90.8 from 91.2 in the prior month (see first chart). Of the two components, the present situation index has seen a much bigger decline relative to the expectations index, yet both are currently holding near similar levels. Despite the monthly volatility, the report suggests that consumers remain cautiously optimistic.

Regarding general business conditions, the net of the percentage of consumers saying business conditions were good rose 0.7 points to 16.5 while those saying business conditions were bad fell 2.5 points to 39.9 in February. Those results put the net business conditions index at -23.4 for February (see top of second chart).

For the labor market, the net percentage of consumers saying jobs were plentiful gained 1.9 points to 21.9 while those saying jobs were hard to get fell -1.3 points to 21.2. The net index for current labor conditions comes in at 0.7 for February, up from -2.5 in January (see top of second chart).

Regarding consumer expectations, consumers’ expectations for business conditions in six months weakened slightly with the net percentage falling to 13.3 from 15.1 while the net percentage expecting better labor market conditions fell to 5.5 from 8.3 in January (see bottom of second chart).

Overall, the survey results suggest consumer attitudes remain cautiously optimistic. The declining number of new Covid-19 cases and rollout of vaccines are likely supporting an improved view of current conditions. However, views of current conditions and expectations for the future remain at historically modest levels.

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