The Conference Board’s measure of consumer expectations for the future—which is especially important right now—took a 19-point plunge. This sudden decline led to widespread fears of an impending recession. The measure, a critical driver of the Consumer Confidence Index, sunk 9.6 points to an all-time low of 65.2. This is the worst reading in 12 years.
That future expectations measure is a very closely watched indicator. Beyond its cultural significance, it is arguably the most important metric for economists and policymakers to focus on. As such the index is one of the most important short-term leading indicators of economic activity and a principal driver of market sentiment.
Any number below 80 on the future expectations measure is seen as a harbinger of a recession to come. The recent plunge well below this threshold has intensified fears about the economic outlook. This sharp drop indicates that consumers are growing more worried about where the state of the economy is headed.
Consumers' optimism about future income — which had held up quite strongly in the past few months — largely vanished, suggesting worries about the economy and labor market have started to spread into consumers' assessments of their personal situations. - Stephanie Guichard, senior economist, global indicators at The Conference Board.
The Conference Board’s report is the latest evidence of a deepening consumer malaise. They’re important for another reason; they serve as an essential input for many economic forecasting models. The large drop in overall confidence shows just how worried people are about the economy. These factors include inflation, interest rates, and the overall health of the job market.
It is the measure of future expectations that is considered a closely watched bellwether of consumer sentiment. The recent data shows that public attitudes have turned. That would have major ramifications for what federal spending and investment decisions are taken in the months to come.
