According to the Conference Board, consumer confidence fell to its lowest level since February in August as a result of fears about an outbreak of the delta form of the coronavirus, which has spread across the United States.
Having seen a revised drop in July, the index is currently 113.8 (1985=100), down from a previous high of 125.1. From 157.2 in the previous month, the present situation index, which measures current business and labor market conditions, dropped to 147.3 this month.
Due To Concerns Over The Delta Variant, Consumer Confidence Fell To Its Lowest Point Since February In August
Specifically, the expectations index, which measures one’s level of optimism in the future, dropped to 91.4 from 103.8 in the previous quarter.
Lynn Franco, senior director of economic indicators at the Federal Reserve, said consumer confidence has declined to its lowest level since February 2021 in August.
As a consequence of concerns about Delta variant as well as, to a lesser extent, increasing petrol and food costs, respondents had a less optimistic outlook for present economic circumstances and short-term projected growth.
Recent data on the economy have raised worries about the spread of recession. Still, a survey released on Tuesday revealed that house prices climbed at a record annual rate of 18.6 percent in June, marking the third consecutive month in which home prices soared at a record annual rate (see chart below).
Meanwhile, job creation has increased by more than 900,000 positions on consecutive weeks, and weekly jobless claims have continued to trend downward for the second consecutive week. Following that, the Labor Department will release its monthly jobs report on Friday, which will serve as a capstone to the week’s employment data.
It was announced last week that the Federal Reserve Board is ready to begin decreasing its $120 billion-per-month purchases of Treasury bonds and mortgage-backed securities, which have been used to support the financial markets and keep interest rates low.
It was predicted that the economy would slow in the second half of 2021, and it is too soon to tell what impact the increase in coronavirus infections would have on the entire economy. Some major corporations, like Apple and Facebook, have postponed office reopenings, while many others have mandated that their workers wear masks and get vaccinations.
Despite the fact that spending on services increased at a steady pace, it is likely to fall short of the rate that will be required to compensate for the additional reductions in goods expenditure that are anticipated in the near future. Consumer spending was also affected by increased prices in July, which resulted in a slight decrease in total expenditure adjusted for inflation in the month.
To add to this, Tilley said that “the savings rate increased a little to 9.6 percent, owing in part to an increase in income resulting from the first monthly delivery of the enhanced Child Tax Credit, as well as a more moderate pace of expenditure. Consumer spending has started the quarter on a shaky foundation.
The Delta variation seems to have weighed on spending even more in August, putting GDP forecasts for the third quarter and the rest of the year in danger of being revised downward.