After maintaining momentum in January, the volatility in equity markets appears to have adversely affected consumers’ assessment of the current economic landscape. Consumers’ view of the future also pulled back.
February’s reading of consumer confidence showed that consumers’ views of both the current and future economic situation deteriorated over the past month. The headline index fell to 92.2 from January’s 97.8 reading. Consumers’ views of the present situation fell to 112.1 from January’s 116.6, while the future expectations component fell to 78.9 from 85.3. In the current environment, slightly more respondents viewed employment as hard to get and slightly more respondents labeled current business conditions as bad. Consumers’ views of inflation remained relatively stable for the month at 4.7 percent from January’s 4.8 percent.
While the pullback in confidence is a bit concerning, it will likely take more than one month of soft confidence data to have a dramatic effect on real consumer spending. Given January’s solid retail sales report, we maintain our view of real consumer spending in the first quarter somewhere around 3 percent.
Wells Fargo said. “We do admit, however, that should equity market sell-offs continue in the months ahead, there could be a further erosion in consumer confidence and, in turn, a slower pace of real consumer spending. Over the course of the next several months, we see the psychological effect of continued equity market sell-offs as one of the largest risks to our current economic outlook.”
Reference: Wells Fargo's Economic Indicators Report
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