If Consumers Don’t Consume, a Recession Could be Presumed

View recent analysis:

Consumer sentiment fell at its fastest pace in three years, and to its lowest level since January 2021 according to the Conference Board. And chances, weak figures are likely to appear in Friday’s University of Michigan’s (UOM) report.

The two main consumer sentiment reports for the US are released each month by the Conference Board (CB) and the University of Michigan. They generally tracked one another quite well up until the pandemic, but since 2020 the CB read has been elevated relative UOM’s. While a sizable spread remains in place between the two, there has been a noteworthy deterioration for both since Trump took office.

Concerns over inflation and low growth have likely been hammered across most news channel, adding to concerns that Wall Street investors raised back in Q4. The question now is where consumers are concerned enough to stop consuming and tip the recession they seem to be worried over.

Summary of CB consumer sentiment:

Down for a fourth consecutive month, consumer sentiment fell to its lowest point since January 2021
The -7.2 m/m decline was its fastest in 3.5 years
The expectations index fell to a 12-year low of 65.2, well below the ‘recessionary threshold’ of 80
Optimism of future income was flat, breaking the trend of clear optimism in recent months
The fall in confidence was driven mostly by consumers aged 55 and over, and to a lesser extent, those ages between 35-55 years
The decline in confidence was also driven mainly by those earning less than $125k per year

All eyes are now on the University of Michigan Consumer Survey

The final revision of the UOM consumer sentiment survey is released on Friday, and it provides much greater detail over the headline preliminary figures. But looking through February’s data reveals plenty of concern among US consumers. Particularly over personal finances.

Expected personal finances contracted by -10 points, its fastest monthly decline in 32-months
Current personal finances contracted for the first month in seven (and fastest pace in eight)
The annual trend in the household financial situation contracted -12 points m/m, its fastest pace in 16 months
Buying conditions fell -20 points, its fastest decline in nine months

If concerns over personal finances continue to decline, it seems highly likely that consumption and therefore economic growth will dry up. And while that will turn out to be deflationary, the economy may need to endure a recession to get there. Trump did warn that there may be some near-term pain to suffer while he balances the books, and it’s already showing up in the data before tariffs have even been implemented.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.