Despite the fast-spreading coronavirus that’s sickening and killing thousands around the world and plunging financial markets into turmoil, consumers remain remarkably confident.
The Conference Board reports that its Consumer Confidence Index, based on consumers' assessment of current business and labor market conditions, rose slightly in February after another gain in January.
The index rose to 130.7 despite the fact that consumers’ short-term outlook for business and employment conditions suffered a significant dip.
But that was more than offset by a sharp rise in the Expectations Index, which measures consumers' short-term outlook for income, business and labor market conditions in the months ahead. That rose more than six points.
"Despite the decline in the Present Situation Index, consumers continue to view current conditions quite favorably,” said Lynn Franco, senior director of Economic Indicators. “Consumers' short-term expectations improved, and when coupled with solid employment growth, should be enough to continue to support spending and economic growth in the near term.
‘Glass is half-full’
The February report seems to indicate a “glass is half-full” sensibility among consumers. They generally think the present situation isn’t as good as it should be, but they’re optimistic about the short-term future.
Consumers who describe business conditions as "good" declined from 40 percent to 38.6 percent. Those saying business conditions are "bad" rose from 10.4 percent to 11.9 percent.
Consumers weren’t as bullish on the job market this month. Those saying jobs are "plentiful" fell from 47.2 percent to 44.6 percent, while those claiming jobs are "hard to get" increased from 11.9 percent to 14.8 percent.
Despite that finding, consumers generally expect their fortunes to improve in the near future. More than 20 percent expect business conditions to be better in six months, up from a little more than 18 percent in January. There was also a decline in the percentage of consumers expecting business conditions to get worse.
Didn’t fully measure the market sell-off
The February survey was mostly conducted before this week’s dramatic stock market plunge over concerns about the coronavirus, codenamed COVID-19. Economist Joel Naroff, of Naroff Economic Advisors, says the market turmoil could have an impact in the near future.
“Consumers remain confident, but continued declines in the equity markets are likely to test their resolve,” Naroff wrote on his blog.
Naroff also sees a warning in the data. The drop in the Present Situation Index in February signals some consumer discomfort with the economy. Unless the stock market bounces back quickly, he says the March report could show a less confident consumer.