The Conference Board’s overall Consumer Confidence Index increased in August, yet this figure does not capture the entire picture. Confidence levels surpassed expectations, rising to 103.3 from July’s 101.9. Additionally, the consumer expectations index climbed to 82.5 from 81.1. For the past year, this expectations index has hovered around 80, a level below which often signals an impending recession. While roughly 25% of respondents expressed positivity about their current family financial situation, over 30% believed their situation would improve within the next six months. The proportion of people anticipating a recession within the upcoming year remained steady at about 66%, significantly lower than the recent peak of 73% observed in May 2023.
The University of Michigan’s consumer sentiment survey reveals a similar trend of heightened sentiment in August. However, when analyzing the political breakdown of these numbers, much of the recent uptick in sentiment stems from Democrats, who experienced a 6% month-over-month increase. In contrast, Republicans saw a 5% decrease, and Independents noted a 3% rise during the same period. Americans’ enhanced optimism about the economy may largely be attributed to the recent transition from Biden to Harris on the Democratic ticket.
Investors should prepare for persistent market fluctuations in the upcoming months. While consumer confidence and sentiment have improved since July, they have largely remained stable over the past year and are well below pre-pandemic levels seen from 2018 to 2020, as well as their peak in 2021. The labor market continues to show signs of weakening, a trend likely to persist without substantial fiscal or monetary interventions—measures that seem unlikely before 2025, considering the upcoming November elections. There might be temporary boosts in confidence in the US economy, but these are often driven by personal political beliefs rather than actual economic conditions.
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Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices does not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
The Expectations Index is a component of the Consumer Confidence Index® (CCI), which is published each month by the Conference Board. The CCI reflects consumers’ short-term—that is, six-month—outlook for, and sentiment about, the performance of the overall economy as it effects them. The Expectations Index is made up of the average of the CCI components that deal with six-month outlooks for business, employment, and income.
The U of M Consumer Sentiment Index is a survey of consumer confidence conducted by the University of Michigan and Thompson Reuters. The Michigan Consumer Sentiment Index (MCSI) uses telephone surveys to gather information on consumer expectations regarding the overall economy.
This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.
