Surging COVID-19 cases dampen US consumer confidence to six-month low in August
WASHINGTON — US consumer confidence fell to a six-month low in August as worries about soaring coronavirus disease 2019 (COVID-19) infections and higher inflation dimmed the outlook for the economy.
The survey from the Conference Board on Tuesday showed consumers less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of robust growth.
Still, more consumers planned to go on vacation, indicating a rotation in spending from goods to services was underway as economic activity continues to normalize following the upheaval caused by the coronavirus pandemic. Increased spending on services, which account for the bulk of economic activity, should keep a floor under consumer spending.
The Conference Board’s consumer confidence index dropped to a reading of 113.8 this month, the lowest since February, from 125.1 in July. Economists polled by Reuters had forecast the index falling to 124.0. The cutoff for the survey was Aug. 25, before the killing of 13 service members in Afghanistan and Hurricane Ida slammed Louisiana.
The measure, which places more emphasis on the labor market, held up well compared to other surveys. The University of Michigan’s survey of consumers showed sentiment tumbling to near decade lows in August because of rising prices for goods like food and gasoline, as well as the resurgence in COVID -19 cases that has been driven by the Delta variant of the coronavirus.
“While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead,” said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.
Consumers’ inflation expectations over the next 12 months rose to 6.8% from 6.6% last month. There are signs, however, that price pressures have peaked, with data last week showing the Federal Reserve’s preferred inflation measure posting its smallest gain in five months in July.
LABOR MARKET HOLDING UP
The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, slipped to a still-high reading of 42.8 this month from 44.1 in July, which was the highest since July 2000.
This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report.
Nonfarm payrolls likely increased by 750,000 in August after rising 943,000 in July, according to a Reuters survey of economists. The unemployment rate is forecast falling to 5.2% from 5.4% last month.
Though fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers this month, more expected to travel domestically, with many intending to fly to their destinations.
Households accumulated at least $2.5 trillion in excess savings during the pandemic, laying a strong foundation for consumer spending. Gross domestic product growth estimates for the third quarter are around a 5% annualized rate. The economy grew at a 6.6% pace in the second quarter. —