Consumer confidence tanked in February as recession worries rose

Consumer confidence took a significant hit in February, with The Conference Board Consumer Confidence Index dropping by 7.0 points to 98.3, marking the largest monthly decline since August 2021. This decline reflects growing concerns about the economy and signals potential recession risks ahead.

The Present Situation Index, which assesses consumers' views on current business and labor market conditions, fell by 3.4 points to 136.5. Meanwhile, the Expectations Index, which gauges consumers' short-term outlook for income, business, and labor market conditions, dropped 9.3 points to 72.9. 

It’s the first time since June 2024 that the Expectations Index has fallen below the critical threshold of 80, a level that typically indicates heightened recession risk.

Stephanie Guichard, senior economist, Global Indicators at The Conference Board, highlighted the widespread nature of the decline. 

"This is the third consecutive month of decline, bringing the Index to the bottom of the range that has prevailed since 2022,” she said in a statement. “Consumers became pessimistic about future business conditions and less optimistic about future income."

The decline in confidence was observed across all age groups, with the most significant impact on consumers aged 35 to 55. The drop was also broad-based among income groups, except for households earning less than $15,000 a year and those earning between $100,000 and $125,000.

More inflation ahead?

Inflation expectations surged, with average 12-month projections rising from 5.2% to 6%. This increase is attributed to persistent inflation and recent price hikes in household staples, compounded by anticipated tariff impacts. Guichard added that discussions around trade and tariffs have resurfaced, reminiscent of levels last seen in 2019.

Consumers' views on their financial situations have also dimmed. The proportion of consumers anticipating a recession over the next 12 months reached a nine-month high. Stock market optimism declined, with only 46.8% of consumers expecting stock prices to rise over the coming year, down from 54.2% in January.

While purchasing plans for homes showed some recovery, likely due to declining mortgage rates, intentions to buy cars and big-ticket items, such as TVs and electronics, decreased. Consumers' priorities shifted slightly towards personal and health care, and live entertainment, at the expense of streaming and travel, with vacation plans continuing to decline.