2022 Consumer Confidence Trends

After three straight months of declines, consumer confidence, as measured by the Conference Board’s Consumer Confidence Index, rose in August. The Index now stands at 103.2, a significant increase from 95.3 in July. 

The Present Situation Index, based on consumers’ feelings about business and labor market conditions, gained six points in the index. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, increased to 75.1 from 65.6.

“The Present Situation Index recorded a gain for the first time since March,” said Lynn Franco, senior director of Economic Indicators at The Conference Board. “The Expectations Index likewise improved from July’s nine-year low, but remains below a reading of 80, suggesting recession risks continue. Concerns about inflation continued their retreat but remained elevated.”

So it’s not like everything’s rosy all of a sudden. Consumers are still having to deal with inflation just about everywhere. 

Falling gas prices may boost confidence

But it might not be a coincidence that consumers are gaining confidence as gasoline prices, which hit a record high in June, have come down significantly since then. According to AAA, the national average price of regular gasoline is $3.83 a gallon, down from its recent record of $5.01.

At the same time, job growth is slowing. The Labor Department reported this week that the number of job openings was little changed at 11.2 million on the last business day of July. Hires and total job losses were also little changed.

After reviewing the consumer confidence data, Robert Hughes of the American Institute for Economic Research, writes that consumers may be enjoying lower gas prices but still encounter higher prices elsewhere and don’t expect them to go down anytime soon.

Still high inflation expectations

“Inflation expectations remain extremely high as prices for many goods and services continue to rise at an elevated pace,” Hughes said. “The extreme outlook for inflation is a key driver of weaker consumer expectations.

Hughes believes there is reason for some optimism that supply chain bottlenecks are being resolved and that shortages will soon dissipate, removing some of the upward pressure on prices.

Franco also sees glimmers of hope in the latest report. She notes that more consumers have indicated they plan a major purchase soon and that intentions to take a vacation reached an eight-month high in August.

Between record-high gas prices, infant formula shortages, and surging grocery bills, May was a tough month for consumers.

That’s reflected in the Conference Board’s Consumer Confidence Index, which declined in May after a small increase in April. Rising prices appear to be taking a toll on consumers’ pocketbooks and are affecting their overall outlook.

“Purchasing intentions for cars, homes, major appliances, and more all cooled—likely a reflection of rising interest rates and consumers pivoting from big-ticket items to spending on services,” said Lynn Franco, senior director of Economic Indicators at The Conference Board. 

Franco also said consumers appear to be reevaluating summer vacation plans because of rising hotel rates and airfares.

“Indeed, inflation remains top of mind for consumers, with their inflation expectations in May virtually unchanged from April's elevated levels,” Franco stated. “Looking ahead, expect surging prices and additional interest rate hikes to pose continued downside risks to consumer spending this year."

Consumers feeling inflationary pressure

An analysis of recent reviews posted at ConsumerAffairs also suggests that some consumers are feeling inflationary pressures. Kenneth, of Manchester, Pa., told us he was “very satisfied” with the coverage he was receiving from CarShield but recently decided he could no longer afford it.

“They helped me with two repairs I would not have wanted to deal with alone,” Kenneth wrote in a ConsumerAffairs review. “Unfortunately with the past years growing inflation with everything from groceries to gas I had to cancel my subscription, sadly.” 

Brett, of Jackson, Miss., was considering Smile Direct but was reluctant to sign up because the $90 monthly fee was outside his current comfort zone.

“I knew I couldn't afford much,  inflation has hit my family hard, especially groceries and gas, and as the sole income, I can't stray far from the budget,” Brett told us.

Inflation isn’t the only thing that weighed on consumers’ minds last month. Despite the well-publicized difficulty that businesses have had hiring employees, consumers are feeling less secure in the workplace.

The Conference Board report shows that 51.8% of consumers described jobs as "plentiful," down from 54.8% in April. Just over 12% of consumers said jobs are "hard to get," up from 10.1%.

Consumers remain in an unhappy mood this month, as measured by the Conference Board’s monthly Consumer Confidence Index. After falling in January, the index declined again this month, with rising prices being a chief concern.

"Concerns about inflation rose again in February, after posting back-to-back declines,” said Lynn Franco, the Conference Board’s senior director of Economic Indicators. “Despite this reversal, consumers remain relatively confident about short-term growth prospects. While they do not expect the economy to pick up steam in the near future, they also do not foresee conditions worsening.”

But there are plenty of things to worry about, especially regarding inflation. The price of gasoline is now averaging around $3.53 a gallon for regular, 23 cents a gallon more than at the beginning of the year. Sanctions against Russia could reduce the amount of oil on world markets and push prices up even more.

Housing concerns

Rents are skyrocketing. In many markets, the payment on an entry-level home is cheaper than renting. But Lawrence Yun, chief economist at the National Association of Realtors, says finding an entry-level home is getting harder.

"There are more listings at the upper end – homes priced above $500,000 – compared to a year ago, which should lead to less hurried decisions by some buyers," Yun said. "Clearly, more supply is needed at the lower end of the market in order to achieve more equitable distribution of housing wealth."

Yun says the median existing-home price for all housing types in January was $350,300, up 15.4% from January 2021, making the housing affordability issue even worse.

Credit card worries

In another measure of the financial stress that many consumers face at the start of 2022, personal finance site WalletHub has published a study showing that about 42 million Americans expect to miss at least one credit card payment this year.

"The financial stress caused by the pandemic has reshaped the way people look at money,” WalletHub analyst Jill Gonzalez told ConsumerAffairs. “However, according to WalletHub's economic index, consumers are significantly more confident about their financial outlook now than they were at the end of 2020. This is an indication that the overall economy is recovering from the effects of the pandemic."

Despite that recovery, growing economic concerns appear to be reflected in the Conference Board’s latest survey. Fewer consumers expect an increase in income in the next six weeks, while about 12% expect their incomes to go down.

Franco says the results suggest that confidence and consumer spending will continue to face headwinds from rising prices in the coming months.

Consumer sentiment dropped sharply from January, according to the latest University of Michigan consumer confidence survey.

The monthly index dropped to 61.7 in February, a significant one-month move from the January reading of 67.2. The consensus among economists surveyed before the release was that confidence would be little changed from January.

But there were a number of factors weighing on consumer attitudes. Inflation is raising the cost of food and gasoline, the COVID-19 pandemic seems to be never-ending, and geopolitical tensions are rising.

Consumers are reacting in different ways. Thomas, of Clarksville, Ind., tells us he is investing in gold.

“Noble Gold's representative helped me to handle the transfer of a portion of my IRA to gold,” Thomas wrote in a recent ConsumerAffairs review. “A wise precaution in the inflationary environment ahead.”

Affluent households are the most pessimistic

The survey shows that the biggest decline in consumer sentiment is in relatively affluent households – those earning at least six figures. The sentiment among that group fell by 16.1% in early February from the previous month. 

"Sentiment continued its downward descent, reaching its worst level in a decade, falling a stunning 8.2% from last month and 19.7% from last February," said Richard Curtin, the survey's chief economist. "The recent declines have been driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government's economic policies, and the least favorable long-term economic outlook in a decade."

The most recent inflation data put the decline in context. Last week, the Labor Department reported that inflation increased 0.6% from December to January. Over a 12-month period, inflation is growing at a rate of 7.5%, the highest in 40 years.

The cost of food is up 7% year-over-year. Gasoline is up 40% during the same period, and the cost of shelter has risen 4.4%, according to the government report.

The authors of the University of Michigan survey say the plunge in consumer sentiment this month is the largest in more than a decade. However, they also say it's part of a recent trend. Higher-income earners are especially worried, believing their inflation-adjusted incomes will decline in the months ahead.

With cases of the Omicron variant rising along with prices, January is turning out to be a rough month for consumers. The Conference Board reports that consumer confidence declined this month, with the index falling nearly two points from December.

In particular, consumers appear to have concerns about the future. The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions—declined to 90.8 from 95.4. 

"Consumer confidence moderated in January, following gains in the final three months of 2021," said Lynn Franco, senior director of Economic Indicators at The Conference Board. "The Present Situation Index improved, suggesting the economy entered the new year on solid footing. However, expectations about short-term growth prospects weakened, pointing to a likely moderation in growth during the first quarter of 2022.”

The survey found that some consumers have yet to feel any meaningful impact from inflation, but others have. The word “inflation” has begun to show up in reviews that consumers post about a wide range of companies.

Brenda, of Grand Saline, Texas, recently had a medical procedure and really needed her recently canceled Synchrony credit card.

“I had counted on my credit cards to help pay for necessities so that I can pay the high cost of blood thinners that I will need to keep the stent from becoming blocked,” Brenda wrote in a ConsumerAffairs review. “Our income is too high for assistance, but with inflation, it's not enough to make ends meet.”

Inflation worries still high

Franco says that, overall, the monthly survey found slightly fewer concerns about inflation. However, rising prices remain a background concern after hitting a 13-month high in November.

“Concerns about the pandemic increased slightly, amid the ongoing Omicron surge,” Franco said. “Looking ahead, both confidence and consumer spending may continue to be challenged by rising prices and the ongoing pandemic."

That said, the survey found that the percentage of consumers who are planning to purchase homes, automobiles, and major appliances over the next six months all increased.