U.S. consumer confidence fell in August to its lowest level since 2014, as households grew worried about their financial conditions and job prospects, casting doubts on the vigor of the economic rebound from the COVID-19 recession.
The Conference Board said its Consumer Confidence Index was 84.8 in August, down from 91.7 in July. Its Present Situation Index, which is based on consumers’ assessments of current business and labor market conditions, recorded an even sharper decline, falling from 95.9 to 84.2 for the month.
“Consumer confidence declined in August for the second consecutive month,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement, adding that consumers reported that employment conditions had deteriorated.
The survey’s so-called labor market differential, which reflects how easily people think they can find a job, fell to a reading of minus 3.7 in August from 2.2 in July. In August of last year, with the U.S. economy roaring and unemployment at a historic low of 3.5 percent, that reading was 38.3. This, along with the fact that the economy added 1.763 million jobs in July after a record jump of 4.791 million in June, reinforces the view that the labor market recovery is losing steam.
France also said consumers’ optimism about their financial prospects also fell.
“Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead,” she said.
The Conference Board report showed that the share of consumers expecting an increase in income fell to 12.7 percent in August from 14.8 percent in July.
“The consumer is the most worried they have been all year, which pours cold water on the idea that the economic recovery is sustainable,” said Chris Rupkey, chief economist at MUFG in New York.
The drop in consumer confidence comes amid signs that the economic rebound from the pandemic may be slowing or even reversing, with speculation mounting about whether the U.S. economy is headed for a double-dip recession and will follow a W-shaped path of recovery. At least 28 million people are collecting unemployment benefits and bankruptcies are rising as government aid rolled out at the start of the pandemic dries up and talks on another round of stimulus remain stalled.
“We are clearly in the second phase of the recovery, driven by underlying fundamentals rather than purely the surge in activity as household reengaged,” said James Knightley, chief international economist at ING in New York. “This reinforces our view that a V-shaped recovery will not happen, the U.S. economy is unlikely to recover all of its lost output until mid-2022.”
Bright spots include the housing market, which has shown remarkable resilience to the pandemic, with a Census Bureau report on Tuesday showing new single-family home sales surging to levels not seen in over 13 years. New orders for key U.S.-made capital goods increased in July, the Commerce Department announced Wednesday, though the pace slowed from June’s robust gain, suggesting business investment enthusiasm is ebbing.
White House economic adviser Larry Kudlow said in remarks at Tuesday’s Republican National Convention that the Trump administration is looking to introduce more tax cuts to spur investment and create jobs as America continues its fitful rebound from a deep recession.
“Now, looking ahead, more tax cuts and regulatory rollback will be in store—payroll tax cuts for higher wages, income tax cuts for the middle class, capital gains tax cuts for investment, productivity, and jobs,” Kudlow said.
President Donald Trump recently issued an executive order deferring payroll taxes, which he said he would seek to make into permanent tax cuts if reelected. Trump also said recently that he would like to see the capital gains tax slashed to 15 percent.
America’s record-long economic expansion was cut short by the Chinese Communist Party (CCP) virus outbreak. Lockdowns and business shutdowns decimated the labor market, with 20.5 million jobs lost and the unemployment rate surging to 14.7 percent in April, both post-World War II records.
Gross domestic product plunged in the second quarter at its steepest pace in at least 73 years.
Reuters contributed to this report.