Drop in Consumer Confidence, Expectations for a Double-Dip Recession

By at 25 August, 2020, 3:08 pm

by Raymond J. Keating-

The Conference Board’s Consumer Confidence Index took a dive in August for the second straight month.

The Index in August came in at 84.8 (1985=100), which was down from 91.7 in July and 98.1 in June. The May measure had registered 85.9, which was little changed from April’s 86.9. The Index stood at 118.8 in March and 132.6 in pre-pandemic February.

The August measure of 84.8 also was off markedly from forecasts expecting a small increase compared to July.

The Conference Board noted: “The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased sharply from 95.9 to 84.2. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – declined from 88.9 in July to 85.2 this month.”

Lynn Franco, the Senior Director of Economic Indicators at The Conference Board, observed:

“The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month. Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path. Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.”

Given continuing, staggering levels of unemployment, and widespread evidence and reporting that small businesses are suffering – including a CNBC report last week that small businesses are closing at twice the rate of large firms, while also noting expectations from some that 30-50 percent of small businesses will be closed permanently – poor levels of consumer confidence should surprise no one.

Indeed, while the U.S. might technically pop out of the recession sometime in the second half of this year thanks to a mini-snapback due to the end of government shutdowns, the possibility of a double-dip recession stands out as a very real possibility.

In fact, in my view looking at the data and trends, a double-dip recession seems more likely than not. My key concern is that amidst all of the reports about layoffs and declining investment at large firms, the traditional and powerful trend working against such job and investment cuts – that is, new business creation and job creation amongst startups and other small businesses – is nonexistent right now and apparently will be for the coming months.

These fundamental ills point to continuing, major problems for our economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.



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