The humble egg becomes a beacon for the US economy. Of course, egg shortages can be explained by looking at the impact of the avian flu. Purchase restrictions at some grocery stores, though, trigger memories of pandemic frustrations, helping to undermine consumer confidence. Egg surcharges at Waffle House and Denny’s are an added irritation.
The Conference Board just announced that US consumers registered their sharpest monthly decrease in economic confidence since August 2021. In addition to the pandemic, topical at that time was the tragic American exit from Afghanistan and those very strange Olympic Games in Tokyo. Now Americans are wrestling with factors closer to home. Among economists, consensus expectations aimed for an index reading near 103 in February. The actual level for the month is 98.3.
The American egg business aside, the root causes of the dour outlook are likely public-sector restructuring and private-sector layoffs, with an added dose of geopolitical uncertainty.
Government downsizing may not technically impact the overall US economy. The federal civilian workforce is less than two percent of the total labor force. Still, the newsflow is sobering, if not outrageous. There is a spillover impact on how people feel about income stability, more so in some areas of the country than others. Besides the greater Washington area, there are hefty numbers of federal workers in Texas and California.
Companies across the nation face economic-adjustment issues. Meta has downsized again; Paramount is leaner than it was a year ago; GM is trimming overhead at its manufacturing plants. The real issue with consumer confidence, however, may be the fear factor. With layoffs impacting so many industries, other companies have carte blanche to think about cutting their own staffing levels. That buzz turns into dread on the sales floor or at the loading dock.
A Trump trade war looms large. That concern was captured in the Conference Board data, with survey participants expecting inflation to reach 6% over the year ahead. Offering context, an independent research firm made a splash a few weeks ago by calculating that the retail price of an automobile in the US could increase by $3,000 on average, if protectionist policies on Mexican trade take hold. Those tariffs now appear set to kick in, despite an earlier reprieve.
We are cautious in overreading the data. The Consumer Confidence Index is a volatile measure. The sharp downside may be a knee-jerk reaction to a peculiar confluence of unfamiliar developments. Also, the first quarter is legendary for something economists call “residual seasonality.” In simple terms, that means economic indicators often deliver substandard results early in the year. Nevertheless, we acknowledge the risk of further economic malaise. ■
Our Vantage Point: Recent data validates a sharp decline in US consumer confidence. Inflation concerns are a prominent issue. As part of a mix of information, economic expectations for the year ahead are faltering.
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