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Consumer Confidence: Why Does It Seem to Be Declining?

Isaac Nuriani    |
Sep 15, 2023
  • Consumer Confidence Index tumbles in August.
  • Inflation just posted its biggest monthly gain in over a year.
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Did you know that Bidenomics is actually a thing? And that it’s supposed to be a good thing?

It wasn’t always that way.

Once upon a time, the term “Bidenomics” was a snide pejorative, used by the president’s political opponents as a sarcastic term for the economic “strategy” they like to say has produced, among other conditions, the highest inflation and fastest interest-rate increases in 40 years.[1]

Many still use it that way. Just last month, during an appearance at a fundraiser for the South Carolina Republican Party, Donald Trump said, “One of the most important issues of the campaign will be who can rescue our country from the burning wreckage of Bidenomics,” Trump said. “You know what that stands for right? Henceforth, it will be defined as inflation, taxation, submission and failure.”[2]

For months now, on the back of what have been robust headline economic numbers in areas such as unemployment, consumer spending and GDP growth, the administration has seen fit to essentially coopt “Bidenomics” from critics and spin the term as a positive.

“Bidenomics,” a recent White House statement says, “is rooted in the recognition that the best way to grow the economy is from the middle out and the bottom up.”[3]

Unfortunately for the president, the public-relations “repackaging” effort doesn’t appear to be working terribly well.

According to a recent CNN poll, a mere 25% of the country describes economic conditions in America today as “good.” And slightly more than half the country agrees with this depressing statement:

The economy is still in a downturn and conditions are continuing to worsen. [4]

As for how Americans view the economy specifically in terms of the president’s stewardship, let’s just say they don’t seem to be impressed. The survey revealed that just 37% approve of how Biden is handling the economy, while 63% explicitly said they “disapprove.”[5]

Did I mention this was a CNN poll, of all things?

And now there’s this: After spiking in recent months, consumer sentiment – chiefly viewed as how consumers see their own prospects in the current economy – once again is either sinking or struggling to keep its head above water, depending on which piece of evidence you’re looking at.

After making strides in both June and July, The Conference Board’s Consumer Confidence Index for August tumbled. The University of Michigan’s Index of Consumer Sentiment, which has languished among its lowest values for some time, had been surging slightly since May, but recently has appeared to have hit a bit of a wall.

And according to the New York Fed’s Survey of Consumer Expectations for August, longer-term inflation expectations now are at their highest level in well over a year while various measures of personal financial prospects suggest any recent optimism consumers might have been feeling about what lies ahead could be dampening.

The surveys – more recent assessments of consumers’ outlook than even the referenced CNN poll – seem to indicate that despite some good-looking economic numbers, Americans seem considerably less than enthusiastic.

So, just what it is that has them so glum? This week, we’re going to dive into these surveys and see if we can find out.

Survey Data Across the Board Points to Fading Optimism

The details contained in the New York Fed’s Survey of Consumer Expectations suggest a wide swath of America has a significantly less than upbeat view of what the near-term future holds for the country…and for them.

Even though inflation is considerably lower than it was a year ago, consumers don’t appear to have much confidence that it will return to the Fed’s 2% target anytime soon. According to the August survey numbers, although expectations for inflation in the medium term (three years out) declined 0.1 percentage points from July – down to 2.8% from 2.9% – consumers expect inflation both one year from now and five years from now to be higher than they said in July.[6]

A year from now, consumers expect inflation to be at 3.6%, 0.1 percentage points higher than they said in July. And in five years, they expect inflation to still be at 3.0%…also 0.1 percentage points higher than they said in the previous survey.[7]

That’s not all. Expectations for income growth declined in August, dropping from 3.2% in July to 2.9% in August, the lowest level since July 2021. And expectations for job loss? Those spiked from 11.8% in July to 13.8% last month – the highest that percentage has been since April 2021. It seems difficult to conclude anything other than a noticeably greater sense of foreboding among Americans about future job security right now.[8]

Unsurprisingly, median expected growth in household income fell a fair bit last month, as well, dropping 0.3 percentage points to 2.9% – the lowest point for THAT measure since July 2021.[9]

All of this leads to a broader metric designed to assess consumers’ expectations of what their overall financial situations will be a year into the future. The August survey results showed that the percentage of consumers who anticipate their households will be either “somewhat better off” or “much better off” at that time declined to 23.8% last month from the 29.3% who expected the same thing in July.[10]

The Conference Board’s Consumer Confidence Survey

The results of another survey, The Conference Board’s Consumer Confidence Survey, also reflect a recent turnaround in consumer sentiment. The metric generated by the survey results, The Conference Board’s Consumer Confidence Index, declined significantly last month to 106.1 from 114.0 in July (measures above 100 suggest greater optimism, while those below 100 indicate greater pessimism).[11]

Dana Peterson, chief economist at The Conference Board, noted the index’s downturn last month ended up “erasing back-to-back increases in June and July.”

“Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” she added, pointing out that “the pullback in consumer confidence was evident across all age groups – and most notable among consumers with household incomes of $100,000 or more, as well as those earning less than $50,000.”[12]

Revealingly, a component index of the overall metric, the Expectations Index – which asks consumers to assess conditions six months ahead – sank from 88 in July to 80.2 last month. Not only was the measure already firmly entrenched in the “pessimism” part of the spectrum, but it couldn’t keep from tanking further in August. What makes the 80.2 measure particularly notable is that it’s now just barely above the key measure of 80 that The Conference Board describes as “the level that historically signals a recession within the next year.”[13]

In her assessment about the relatively sharp drop in the Expectations Index, Dana Peterson noted there’s “less confidence about future business conditions, job availability, and incomes. She added, “Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to rise—making big-ticket items more expensive.” The economist also noted that “average 12-month inflation expectations ticked up.”[14]

University of Michigan Consumer Sentiment Index

In June 2022, the University of Michigan’s Consumer Sentiment Index fell to an all-time low of 50. That’s an all-time low. Granted, the data series goes back “only” as far as 1952…but that’s still pretty far. It means, among other things, that consumers weren’t as gloomy at any point during the era of the 1970s and early 1980s known as the “Great Inflation,” nor at any time during the global financial crisis.[15]

Perhaps not so coincidentally, the index reached that all-time low in the same month annual inflation topped 9% for the first time in nearly 41 years.[16]

Anyway, since last June, the index has recovered some. As of July, it was up to 71.6; still solidly below its running historical average of 85.5, but nevertheless substantively above that record low “achieved” the year before.[17]

By August, the index had ticked down to 69.5. And now we learn that in September it slid backwards once again, to 67.7, below economists’ forecast.[18]

Interestingly, the one-year inflation expectations of Michigan survey respondents declined in September, from 3.5% to 3.1%, which puts that specific trend at odds with those reflected in the New York Fed and Conference Board surveys. But in her summary of the survey results, Surveys of Consumers Director Joanne Hsu noted that “consumers have taken note of the stalling slowdown in inflation,” and that “on net consumers remain relatively tentative about the trajectory of the economy.”[19]

So, what’s going on? Why is it that consumers are seeing things as they are right now, in contradiction to a low unemployment rate along with other headline numbers that at least suggest meaningful economic growth?

Inflation Remains a Principal Concern of Consumers – and Now It’s Accelerating

It seems the principal “thread of negativity” running through each of these surveys is ongoing concern about inflation. And the most recent round of inflation numbers isn’t going to do much to calm the nerves of those who are apparently fretting about it.

It’s true that inflation has been decelerating broadly since the consumer price index last year hit the 9.0% mark I referenced a little earlier. But it seems inflation is hardly finished. Just this week, we were reminded once again about how stubborn price pressures have been during this current inflation cycle.

In August, the headline consumer price index (CPI) increased at a monthly rate of 0.6%…its fastest pace since June 2022. Year-over-year inflation picked up speed last month, as well, rising 3.7% after climbing 3.2% in July.[20]

And as for core CPI, which excludes volatility-prone food and energy prices and thus is seen as a better measure of “true” economic inflation, that sped up last month, too, accelerating at 0.3% after increasing 0.2% in July. The annual core number did decelerate to 4.3% from 4.7%…but it obviously remains well above the Fed’s 2% target level.[21]

Complicating the matter of prices for consumers are elevated interest rates. Inflation obviously puts upward pressure on prices, and higher interest rates are deployed specifically to rein that inflation in. But the fact is that higher interest rates make products more expensive, as well, and when inflation is persistent – like it is, currently – and interest rates are higher – like they are, currently – consumers are stuck dealing with the price consequences of both.

Along those lines, The Conference Board’s Dana Peterson noted from the August survey results that “expectations for interest rates jumped in August after falling two months ago.” This suggests that while the popular refrain right now might be that rate hikes are nearly over and rate cuts are pending, consumers may not be buying it.[22] And given the recent acceleration in CPI I referenced earlier, it’s not as though their concerns are baseless.

There’s also the matter of concerns about job security, which is another recurring theme in these surveys. Sure enough, the July JOLTS report – Job Openings and Labor Turnover Survey – indicated there were 338,000 fewer job openings in July than there were in June (August data isn’t due out until the beginning of October).[23] Total job openings stood at 8.8 million as of the last day of July – the lowest level since March 2021. Also notable from the report is the number of quits fell by 253,000, suggesting Americans may be growing less confident in their ability to quickly find a comparable job if they lose the one they have.[24]

The economy right now is particularly complex. There are headline numbers – such as the previously referenced employment and consumer spending data – that seem to suggest the nation’s economic engine is running on all cylinders.[25] But as we’ve also discussed, the various impacts of chronically higher inflation and interest rates suggest a different reality. And right now, it seems that reality is the one that a growing number of Americans have decided they’re living right now.


[1] Irina Ivanova, CBSNews.com, “Inflation hit 9.1% in June, highest rate in more than 40 years” (July 13, 2022, accessed 9/14/23); Jessica Dickler, CNBC.com, “Another interest rate hike is likely coming from the Federal Reserve. Here are 5 ways it could affect you” (July 21, 2023, accessed 9/14/23).
[2] Rey Llerena, Live5News.com, “Fmr. President Trump headlines annual SC GOP fundraiser in Columbia” (August 6, 2023, accessed 9/14/23).
[3] White House.gov, “Bidenomics Is Working: The President’s Plan Grows the Economy from the Middle Out and Bottom Up—Not the Top Down” (June 28, 2023, accessed 9/14/23).
[4] CNN.com, “CNN Poll on Biden, economy and elections” (August 3, 2023, accessed 9/14/23).
[5] Jennifer Agiesta and Ariel Edwards-Levy, CNN.com, “CNN Poll: Half of Americans think the economy is getting worse, despite months of stronger economic news” (August 3, 2023, accessed 9/14/23).
[6] Federal Reserve Bank of New York, “Survey of Consumer Expectations” (September 11, 2023, accessed 9/14/23).
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] Ibid.
[11] The Conference Board, “US Consumer Confidence Pulled Back in August” (August 29, 2023, accessed 9/14/23).
[12] Ibid.
[13] Ibid.
[14] Ibid.
[15] Alicia Wallace, CNN Business, “Consumer sentiment plunges to record low amid surging inflation” (June 10, 2022, accessed 9/14/23).
[16] U.S. Inflation Calculator, “Historical Inflation Rates: 1914-2023” (accessed 9/14/23).
[17] Trading Economics, “United States Michigan Consumer Sentiment” (accessed 9/14/23).
[18] University of Michigan, “Surveys of Consumers,” (September 15, 2023, accessed 9/15/23); Nicholas Jasinski, Barron’s, “Apple Stock, Adobe, Oracle, Moderna, Lennar, Inflation Data, and More to Watch This Week” (September 10, 2023, accessed 9/14/23).
[19] University of Michigan, “Surveys of Consumers.”
[20] Jeff Cox, CNBC.com, “August core inflation, excluding food and energy, rose 0.3%, hotter than expected” (September 13, 2023, accessed 9/14/23).
[21] Ibid.

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