Consumer Confidence Hits Highest Level in 2023

In April, consumer confidence reached its peak for this year as individuals grew more positive about job availability and income prospects.

The Consumer Confidence Index from the Conference Board saw an increase to 92.8, up from a revised 92.2 in March, surpassing the expected figure of 89 gathered from economists by Bloomberg and the Wall Street Journal.

The Expectations Index, reflecting consumers’ outlook for the next six months regarding income, business, and job market conditions, increased by 1.2 points to 72.2. This uplift can be attributed to enhanced perceptions about both the job market and household earnings. The labor market gap—determined by subtracting the percentage of those who see jobs as “difficult to get” from those considering them “abundant”—expanded from 6.1 points in March to 7.5 points. This change was mainly due to a reduction in the percentage of people reporting difficulty in job searching, which dropped from 21.3% to 19.8%.

This uptick is particularly significant when considering the challenges consumers reported facing during the survey period from April 1 to 22. Prices for Brent crude oil have surged because of conflicts in the Middle East, and gasoline prices are visibly climbing as well. Consumers frequently mentioned concerns about prices, oil and gas, and war more often than they did in March, according to The Conference Board’s write-in responses.

“Consumer confidence did rise a bit in April, but there wasn’t much change overall, despite major worries about rising gas prices from the Brent crude oil increase related to the Middle Eastern conflict,” noted Dana M. Peterson, chief economist at the Conference Board. He pointed out that better perceptions of the labor market and slightly brighter income expectations seem to counterbalance the negative outlook regarding business conditions.

The nearly four-point surge above estimates suggests that economists may be misjudging the influence of energy prices and geopolitical issues on consumer sentiment, while perhaps underestimating the stabilizing role of a resilient labor market. The job report from March reflected an employment bounce-back with 178,000 jobs added and the unemployment rate dropping to 4.3%.

Young consumers under 35 remain the most optimistic demographic, contrasting with those over 55, who are the least confident. This divide aligns with the notion that younger workers are benefiting directly from challenging work environments, challenging the perspective that younger Americans are facing particularly tough struggles in today’s economy.

However, not all indicators were favorable. The current situation index slipped by 0.3 points to 123.8, signaling a downturn in how consumers assess the present business climate. Opinions about the future economic situation were also somewhat pessimistic. The number of consumers believing a recession is “very likely” in the next year has increased, along with a slight uptick in those who feel we might already be in one.

When it comes to purchasing intentions, the results were mixed. Plans for buying significant items shifted from “yes” or “maybe” to “no” in April, though the percentage of affirmative responses remained notably higher than other reactions. The Conference Board pointed out that consumer spending in the coming years will likely emphasize essential services and affordable luxuries rather than costly non-essentials.

The findings from the Conference Board contrast sharply with the University of Michigan’s Consumer Sentiment Survey, which fell to an all-time low in April. These two assessments target different consumer experiences: the Conference Board’s index emphasizes labor market conditions, while the Michigan survey looks at personal finances and living costs. This discrepancy could indicate that consumers feel secure in their jobs yet are squeezed by rising prices, which might clarify why spending continues to be robust despite mixed signals from sentiment surveys.

Recent corporate earnings reports generally indicate strong consumer demand, and data from the Commerce Department showed considerable retail sales growth in March. Preliminary figures for first-quarter GDP, expected to be announced soon, are anticipated to display a significant increase.