Consumer confidence is an important economic indicator that measures how consumers view the state of the economy as a whole and their personal financial situation. When consumers are more confident about the economy, they are more likely to spend, which stimulates the economy and helps to reduce unemployment. When consumers are less confident, they are more likely to save and spend less.
Consumer confidence can be volatile, but it is typically a lagging indicator, meaning that changes in sentiment often don’t translate into actual spending and consuming behavior until after the economy has already experienced fundamental changes. Regardless, it is still an important metric to watch because it provides insight into the state of the economy and can help predict when the next recession may begin.
In the latest survey, the Conference Board’s Present Situation Index fell 1.5 points to 131.5, while the Expectations Index slipped to 65.2—its lowest level since 2013 and well below the threshold of 80 that typically signals a recession ahead. Amid high prices for staples and continued concerns about tariffs, consumers are pessimistic about future business and job prospects.
Moreover, the current survey’s questions ask about how consumers feel about the economy as a whole, which may not capture all of the influences that shape individual sentiments. As our research has found, the macroeconomic fundamentals measured by the HOME index explain about half of the variation in consumer confidence, but other determinants—such as “animal spirits,” hedging and uncertainty, and past experience—may play an even larger role.
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