Calm Before The Storm? What Shocking Consumer Confidence Data Reveals | Stephanie Guichard
Summary
Consumer Confidence: Consumer confidence showed a slight improvement in July, rising to 97.2 from 95.2 in June, yet remains below last year's levels, indicating cautious optimism among consumers.
Economic Indicators: The Conference Board's leading economic indicators, which include factors like trade sales and industrial production, have been declining, suggesting potential economic challenges despite a rise in consumer confidence.
Market Sentiment: Consumers' outlook on stock prices has improved, with 47.9% expecting an increase over the next 12 months, up from 37.6% three months ago, driven by recent stock market recovery and easing trade tensions.
Inflation Expectations: Consumers' 12-month inflation expectations have slightly eased to 5.8%, although they remain higher than actual CPI figures, reflecting a disconnect between perceived and actual inflation.
Spending Intentions: There is a decline in consumer spending intentions on discretionary items like cars, vacations, and dining out, which could signal economic caution, though actual spending behavior often contradicts stated intentions.
Employment Outlook: Consumers are pessimistic about future job availability but remain optimistic about their personal income, indicating confidence in current job stability despite broader economic concerns.
Recession Concerns: Despite ongoing recession fears, with two-thirds of consumers expecting a recession, actual spending patterns have not aligned with these concerns, suggesting a complex relationship between sentiment and economic behavior.
Student Loan Impact: The resumption of student loan payments is expected to impact consumer spending for those affected, adding to existing economic pressures from tariffs and inflation concerns.
Transcript
consumers displayed some optimism already like November, December and then slowly this year I deteriorated and we had a massive deterioration in April. It's pretty scary because you see that you we still have twoird of consumers that are expecting a recession. Today we're diving into economic data, consumer confidence and leading economic indicators by the conference board. It's a research organization that produces economic indicators that are widely considered by mainstream economists to be one of the definitive indices for forward-looking economic growth projections. These indicators offer crucial insights into where the economy is currently at and where it's headed. And I'm pleased to be joined today by uh one of the architects of the of the indices, Stephanie Gisha, senior economist for global indicators at the conference board. Welcome to the show, Stephanie. Good to have you here. Yeah, thanks. So, I'm very happy to be here. Let's start by talking about the latest numbers, consumer confidence for uh July um as published by the conference board. I'll pull up these numbers here. If you take a look at my screen, you'll see that uh in uh July, the conference uh board produced uh numbers that uh showed some improvement in the uh consumer confidence. So, it improved by two points to 97.2, up from 95.2 in June. However, it still rests below last year's consumer confidence level. Meanwhile, the present situation index, it's based on consumer's current assessment, uh fell by 1.5 points while the expectations index, which is a forward-looking um index uh rose by 4.5% uh 4.5 points rather. So, before we get into the details, just give us a summary of the current situation. How strong or weak is the economy based on these numbers? So and maybe you should uh show the chart uh as you numbers. I think this is a you know this is kind of showing the you know if it was really a roller coaster this year for consumers. So uh confidence reach a peak at the end of last year. Uh it was uh we you know uh consumers displayed some optimism uh already like November, December and then slowly this year it deteriorated and we had a massive deterioration in April uh right after you know liberation day people started to get extremely worried about uh prices and the impact of tariff on prices. And how do we know that? We know that because we not only we do the survey but we ask consumers what is driving your view of the economy and it was really the thing that that came on top of their mind since then. So it recovered in May but now it's very stable and it's stable a bit below uh the low points of the past two three years. So I would say you know consumers are very cautious and it's important for the US economy because you know consumption is was driving GDP and we haven't seen a massive slowdown in consumption but when consumer are worried there is a chance that you know may they may be more cautious about their spending going forward. Uh so that that's that's where we are and it's kind of a wait and see situation. There is no super clear direction. Uh and I think that's fair to say it's uh kind of in between historically uh how accurate has this consumer confidence index be uh been in predicting actual consumer spending in the economy. So what it does is uh it helps predicting consumer spending for a given level of employment, a given level of income, a given level of interest rate. So you know consumption is driven by what consumers have in their pocket and whether they have a job or they are worried about losing their jobs and so on you know you need to think about when you forecast consumption like what are the core driver of consumption okay and everything else being given if consumer confidence is low they're going to be spending less if consumer confidence is high they're going to be spending more so this is how it plays place. So you don't have a onetoone match between consumer confidence and consumer spending but consumer confidence helps you uh to refine brings you more information about what consumers are going to be doing given the current environment. So I would say you know everything being equal if consumers were super optimistic even for the current income they are getting they would be spending less. If they were very pessimistic they would sorry if they were super optimistic they would be spending more. Very pessimistic they would be spending less. At this point they're kind of in between. Uh so it it's really a wait and see but uh you need to dive into the components to see a bit more what is driving uh the assessments of the economy. Yes, let's talk about uh that. So let's talk about the components. Are you surprised first and foremost that uh despite tariff uncertainty and the ongoing trade wars uh that are still happening around the world consu this consumer confidence index has been seeing an uptick. So we saw the I mean the uptake is very interesting. It started after um May 12 and the deal between the US and China. And we know that because when we did our May survey uh we collected data for the world and we had May 12 kind of uh in between uh the the the sample. So we were able to see that there was a faster improvement in consumer confidence after May 12 when they realized that you know uh there was this descalation of trade tension between the US and China. So this has clearly helped uh pushing consumer confidence up after the big worry of April. Uh however you know it has stabilized because they are still very concerned. Okay. Um I want to point something out here. So um this let me just pull this up once more. Uh so we're looking at right now at the consumer confidence index uh which as you can see has been ticking up slightly. However, if you take a look at the US leading uh uh economic indicator that has been steadily falling and so why is it that the leading economic indicator which you know factors in a lot of components including trade sales, industrial production uh among other uh uh components, payroll, employment, personal income um why has that been falling at the same time as consumer confidence slightly improving? Can you explain this disconnect here? Yeah. So, uh, consumer confidence is part of the index. Uh, and but it's, uh, and if you go down, you have the breakdown of the different components. Uh, so you're going to see, uh, one that is called average expectation uh, of business conditions. So, it's taking the expectation component of our index. So it's one of the sub component and it's also not only taking ours but because we wanted to make sure you know we have a broad view of the economy it's also taking into account the Michigan survey and their expectation index about uh um business conditions for both survey this has been very low. So uh basically yeah there is no discrepancy between the two when you look about uh consumer index it has five components. Uh the business condition is one of these components. It has been weak for some time and you can see in this chart that this is one of the indicators that is putting down um the the USI. Another indicator that is putting down the USDI are the orders in the manufacturing sector uh and this is not surprising because of the tariff situation and the worried about you know world trade global economic growth. So and we saw that the manufacturing sector which had rebounded in recent months is is taking a hit again. So this if you look at especially you know the last publication uh these were the drivers and then if you look historically for the past six months it was again these two drivers consumer expectation and manufacturing orders. Okay. Um one more question on the lei uh before we move back to the um consumer confidence indicator. So the recession signal was indicated by these horizontal red lines here that's been triggered several times since 2023. So why no official recession? Well, because um first one of the indicators that has really uh pushed the AI down which is not the case anymore but in 2023 2024 is the yield spread. So you know the difference between long-term rates and short-term rates. Historically, this was the magic indicator to predict a recession. And remember two years ago when the yield curve inverted, everyone started to talk about a recession. It's one of our indicator. And this one has we've been really putting an indicator down. So that's okay. So this one failed. Uh there was no recession. But traditionally when the gift card inverts you get a recession that the other thing is our indicator is heavy on manufacturing. uh so especially you know we have the manufacturing orders and I think you know there was a manufacturing recession but there was no service recession so there were no recession for the economy overall however what our indicators captured was that you know the manufacturing was uh was in trouble in 2023 2024 it came out of trouble end of 2024 I think it may be back there now but so this is captured by our indicators this This is the way it was built. Um service sector is very difficult to capture with macroeconomic data. This is something we working on. But so far I mean it capture more the manufacturing recession then if you have this if you have very concerned consumers because consumer expectations have been very weak in 2023 2024 and on top of that you have a negative yield curve. This is what has driven our index. Okay. Uh, one interesting note um, regarding inflation I'll bring up. It says here um, according to this report that consumers average 12 month inflation expectations eased slightly to 5.8% down from 5.9%. Well, that's still significantly higher than what we currently have. I mean, are these expectations realistic? Okay, so um, consumers expectations for inflation are always higher than the CPI. And what you need to realize is I mean the you know the CPI the or even the PC the indicators we are following they are but they are built on baskets of you know everything that the consumer is buying but consumers they the basket they think about when you ask them about inflation is more something that's you know it's the price they see on the day-to-day basis is the when they go to buy gas when they go to buy eggs when they go to buy groceries they think about these prices they they basket the way they think about inflation is different from our index so this is and the gap has existed historically it's just that they are not they are not thinking in term of CPI they're just thinking how much I paid today when I did my grocery and this is affecting the expectations okay well again um these expectations ations for inflation. Have they historically been accurate in projecting the direction of inflation? So, let's say consumers are expecting 12 month inflation to fall slightly. Does that historically mean that inflation will actually fall slightly? Not necessarily because these are I think they are these are very adaptive expectations. So it's more based on how much uh how much they are paying than how much they expect to pay. That said, it brings some information because you know if consumer are worried about prices, this is very important uh rel when you related to their spending behavior and um and you know when there is a shock I mean when there is like you know a shock to the economy uh they may anticipate like you know an price shock they anticipate the impact right away. in this type of circumstances there is a great correlation with what's happening to inflation afterwards because they know that historically when you have a you know I don't know an energy shock then they're going to get more uh they're going to pay more when they go to the gas stations and then this is going to be reflecting the CPI too. So it works both ways. So part of it is adaptative expectations and part of it is they they see what's happening in the economy and it also helps uh anticipate what's going to happen to inflation. Okay, this is interesting. Um and this is something that I think a lot of my viewers would be interested in knowing. July consumers outlook on stock prices rose from April's for uh 16-month low 47.9% expecting stock prices to increase over the next 12 months up from 37.6%. 6% 3 months ago. What's contributing to this higher bullish sentiment, Stephanie? Well, it's the recovery on the stock market. Uh so, um again, consumers when they b their stock price expectations, they look at stock prices today and think, oh, okay, it's going well. They also follow the news. So, they follow earnings, at least the ones who have stocks, they they follow earnings. And I mean, it's uh they see like the the improvement in the stock market. And it's also um you know the all the world discussion about tariffs they saw that it's not as bad as what they thought because April was already a low point in term of consumer stock prices expectations uh and since then the situation has improved. So they started to reverse uh the um the expectations about stock prices. They are not back where they were earlier this year. At some point it uh we we we reached a record high in term of consumers expecting stock prices to increase at the very beginning of the year and uh but it has it has weakened since then. So it's how they view the economy what they see in terms of stock prices and then uh they listen to the news. Okay, that makes sense. A special question asking consumers about the direction of various interest rates suggested that they largely believe mortgage rates, auto loan rates, and credit card rates were more likely to rise than other types of interest rates. That's interesting. The the expectation for uh the Fed funds rate at least is that the Federal Reserve will likely uh keep rates and change if not lower rates for the remaining of the year. So, I'm wondering why consumers are, at least in this survey, expecting consumer rates to rise. Uh, they also expect the Fed rates to rise, by the way. Um, but not as much as those rates. So, they are kind in the same um they expect the Fed to hike rates this year. They see all the rates moving in the same direction. uh but more seeing uh this rates increasing and this may be due to the the real concern they have about the impact of tariff on inflations and so but because they know that you know if if tariff results in higher prices they are more likely to see an increase in interest rate than a decrease and it's it's it's a concern and it's also uh when you think about the you know the the mortgage rate, the auto loan rates, the credit card rates. It's also a concern that, you know, um maybe about their financial situation, maybe a deterioration in their credit score, they they're going to be paying higher rates even though, you know, even if the Fed doesn't increase rates, they may be asked to pay higher rates because they uh credit scores are deteriorating. And this is something they take also into account. Uh this is important. and purchasing plans for cars and homes declined in July. Uh dining out was also one of the categories seeing the largest decline in spending intentions in July along with transportation and lodging related to personal travel. Consistent with these findings, vacation intentions were also down when consumers spend less on discretionary items like cars, vacations, dining out. Uh Stephanie, is that usually an indicator for an economic slowdown? A leading indicator that is. It could be. I mean it means that it shows that they are stretched. Um so it when they start think what they think about uh you know cutting discretionary saving it means that they are stretched. However, the real test is whether they're going to start with when they start cutting on uh nondiscretionary spending because this is, you know, this is when the economy is is in really bad shape is when you start cutting on the things that you really need like like food at home for example. Yeah. For instance, when you start, you know, to say, I'm going to try to cut on, you know, health care, uh, food at home. Uh, we we have some other examples of, uh, I I don't Are you seeing any evidence of that happening? Consumers cutting down on, um, things that usually have a, uh, inelastic demand? No, we don't see it now. We haven't seen it. I mean, we don't see it in spending intentions. Um so just going back to uh these discretionary items here. So if they plan to I if they if they plan to spend less of that um why are they worried about um you know their their spending because like we talked about earlier inflation expectations are coming down and confidence is up a little bit. So I'm just curious why even though confidence is slightly up and inflation expectations are down, people are still expecting to spend less money. So you need to I mean you you are thinking in terms of small changes but you need to look at the big picture. So overall yes consumer confidence is up but it's lower than what it was last year. Okay. Inflation expectations are slightly down but they are higher than they were a year ago and overall so consumer are more concerned than they were a year ago. And uh so they when you ask them are you going to spend more uh going out going on vacation they say no. That said, it it has happened last year that they tell us, "No, we're going to be saving because we are worried and when you look at the consumption data, they're still spending." And you know, uh, US economists, we're always surprised by how much the US consumers are spending, they as you know, as long as they have a job, as long as they have an income, typically they spend, even if they tell you they're not going to spend, at the end of the day, they still open their wallet. So that's you know that's the upside risk to everything here is that these are intentions this is confidence uh they may still continue to spend right so what are their expectations for employment uh are they expecting to keep their jobs are they expecting any changes to their wages and for those out of the labor force are they expecting to find a job anytime soon so the way we ask the question we're asking there are two questions that are related to that. The first one we're asking consumers uh going forward is it going to be easier or more difficult to find a job? And on that one they are really pessimistic. So they think that it's going to be more difficult to find a job 6 months from now. Okay. So uh and when they answer this question they think about themselves, they think about their kids. They think about their relations. if they uh you know they about people going to the job market or even they think okay if I quit my job today it's going to be more difficult for me to find a job than it was few months ago if I quit my job in 6 months okay maybe I will struggle to find something else however when we ask about the seven question what do you think about your income 6 months from now they are positive so they think that the labor market is going to deteriorate rate. They think that people looking for jobs are going to struggle more to find a job. However, they don't seem to be very concerned about their own income, which means that they are not very concerned about their own jobs. So, for now, they are not worried about losing their jobs. And that's very important because in April when we saw this dramatic collapse in confidence, the income indicator went negative. So in April when everyone panic they thought that okay there is a chance I'm going to lose my job which was reflected in pessimism about future income. It didn't last. They are back in optimism territory. So they're not worried about losing their job. They just think that you know the labor market is going to be uh less robust than it is currently and if you are on the market for a job it's going to be more difficult. Yes, this is the uh current financial situation for families. Can you um help us evaluate uh famil family's current financial situation now in 2025 versus a few years ago? How has this changed? So, and this is a new this is an indicator that we put out in 2022. So, we don't have you know the world story we have for the other ones. Uh so um we know we don't have the same we don't know what's the bottom and we don't know what's the high point. Uh but other this like three years of data what what we see right now it's they're quite optimist I mean they're quite happy about the current financial situation. it uh it's not like it's among the high points that that you see on this picture if you look at the yellow bar which is the difference between the two lines. So it's positive and it's relatively high. Uh it includes you know what they think in terms of their income but also potentially their stocks. uh and uh so far so good uh in terms of their current family financial situation right and uh just going back to uh what we were talking about earlier about recession uh likelihood and probabilities uh I wonder if this is a coincident indicator with other things um the likelihood of a recession perceived likelihood of a recession has been coming down certainly there's been less interest of recession talks on media uh so Yeah, I'm I'm curious to get the actual assessment and I'm curious how this relates to the LEI like I mentioned, right? The the the recession indicator has been flashing for quite some time, but yet like this indicator and other indicators show people are less concerned about it. So can you explain this discrepancy here between this and that? So again, so this one is is a recent indicator. So we don't have the full the fully story that you can see on the on the AEI chart. um what we focus on are the changes. So if you focus on the level it's pretty scary because you see that you we still have twoird of consumers that are expecting a recession uh which I mean you know and it's it's been above uh 60 since we started to ask the question. So it's I mean you could say it's high it's very high and it's completely uh in line with the AEI because both of them are talking about recession but that's not the way we interpret this data. So we just we see it as you know an indication about concerns about the economy uh in general recession talks of course. So when everyone started to talk about a recession uh in 2023, it spiked. Then the recession talk slowed, went down and we see it again. Uh people were started to be concerned about the recession when the discussion about the tariffs came back and then so there was it increased. It spiked in April and since then it has slowed down. It's still higher than last year. uh this is really consumer sentiment and um it's it's a very different indicator than uh than our to what extent is this uh a sort of a self-fulfilling prophecy so to speak. So if let's say a majority of consumers surveyed like 20 2/3 in this case expect a recession and they also expect to spend less on big ticket items. Does that not cause a slowdown? Because if they expected they spend less and then that causes the slowdown. Yeah. If it was the case, we would have had the recession in 2023 2024. It didn't happen. That's the question. The second is and again that's when you ask the consumers this type of question that yes the world is everything is bad you know I'm concerned I'm worried but then when they go to the store they open their wallet it's kind of two different person answering the survey and going to the store so I I don't think especially on this recession question that is relatively new and on which we don't have so much history I wouldn't take it as you as especially as um some you know autoization realizing expectation. So we've talked a lot about consumer's confidence um I'm curious what uh CEO confidence is like and how they compare to consumer confidence. So we have the CEO survey it's quarterly so you don't we don't take the purse of CEO uh every month we just take it every quarter. They were if we look at this year. So we did our first survey in February. They were extremely optimistic like the most optimistic they had been for a few a few years. Then we did our second survey uh in May. Uh and then they were the most worried they had been in the past few years. uh and we just uh published the third one of the year last week and it kind of stabilized into at a neutral level. So basically, you know, they went from super optimistic to super pessimistic to kind of neutral and cautious. And I I don't know if you have the um the charts here that you could display because we were just talking about recession and in our press release we also show their recession expectation and it's jumped to over 80% in May and now it's back to 35%. Oh yeah, we can uh we can look for that chart and put it up later. Uh so I I wonder why uh there's been this big disconnect between how CEOs feel and why and what consumers feel. Is it is it is it simply because CEOs are more wealthy? Is that the only reason? No, we had we are see about their business. Uh and I don't think there is a disconnect. And they both declined a lot uh in May in I mean consumers in April CEOs in May because we didn't do any survey between February and May. So it was the low point and they have both recovered uh and they are both recovered to a level that is better than the low point but not as high as last year. So I think there are kind of uh I would tend to think you know if you if you accept that we don't do the CEO survey every month so we don't have you know the same time series they kind of track each other and they are both in a very kind of cautious wait and see mode both the CEO and and and the consumers it's not as bad as earlier in the spring but it's not as good as last year. Okay. One new development uh well, it's not new, but it's it's a recent development, shall we say, is the return of student loan uh debt and and and payments. So, the Trump administration has reversed the uh the Biden administration's uh pause on student loan repayments. Uh a lot of people understandably are very concerned. This is from the Guardian. Um they've interviewed some people who says that uh they've they're already missing loan repayments and they cannot afford this. Um and now all of a sudden this colossal debt that was previously pardoned is now coming back. How is this going to change consumer spending do you think? Have you have you have you surveyed people about this issue? Yes. Yes, we did. So we we asked uh consumers uh in July uh first we asked them I mean do you still have now starting student loan or not? And for the ones who had the student loans that they had to service, we asked them about uh whether they were concerned about the uh recent changes in the in the loan program to affect their ability to spend and almost half said yes, this is going to affect my ability to spend. uh we asked other question about whether it could affect their ability to take new loans uh to service the other loans and they I mean we had like between I don't have the exact number but between 35 and 40% saying yes uh so I believe and also you know if if the the payment they need to do for the student loans affect their ability to service the other loans it's a potential way of um you know the delinquency to spread to some other credit lines um you know if consumers because they they decide okay I'm going to pay the student loan then you I can't pay the other loans so it could uh kind of spread uh the difficulties across the financial system uh they're also concerned about their credit scores because you know uh for the past five years if you didn't pay your student loans it couldn't affect your credit score now is going to affect your credit score for and your ability to take new loans. So these are things that are worrying consumers. However, uh you ask me about you know the impact on consumer spending. I mean this is not affecting every single consumer in the economy. It's uh you have less than 20% of the US population who has a student loan to service. So you already decline you know and not of them are in default is just another headwinds to uh you know it's adding to the headwinds to uh consumer spending uh alone I mean if it was the only thing that's happening in the economy it wouldn't have much of an impact because there are more things happening in the economy because consumers are worried about inflation because uh we have the impact of tariffs because we see labor market footing. Uh this is just adding to the other factors. So overall then given all the surveys and indicators that we've looked at so far, how would you and your colleagues assess the financial conditions of the average consumer now and into the end of the year? Do you expect improvement, deterioration or no change between now and the end of the year? I mean we are still waiting to see the impact of tariffs feeding through inflation. This is affecting consumer finances. um we don't expect a major deterioration of consumer finance uh this year. I think you know uh we are watching what the Fed is going to do. We see a potential for a cut towards the end of the year uh as the economy slows. Uh so we know that you know debt is high but um it's still manageable and consumers still have income you know as long as they have income as long as they are jobs they're able to continue servicing their loans so we are not a necessary concern so far are are I know this is very difficult to assess but generally how often are consumers actually right about their own expectations versus incorrect. Uh that's hard to say. I think it's the the question is not whether they are right. The question is whether they act according to their feeling and it seems you know they they're worried but they still spend. They're worried that they you know they're worried about the economy in general. They're worried about inflation but they have been spending for the past two years. they were they were worried 2023 2024 they were worried about the economy there was planning so it's more like an um it's an internal uh you know discrepancy between what they say and what they do because a year ago we had the survey we asked them interests are high inflation is high are you going to save more they said yes then we did look at the inflation the consumption data consumption is up so Um that I think that that's where you know that's what makes it difficult to assess. Yeah, that is interesting. Uh maybe maybe it's not the same people that are spending money versus the same people surveyed. Is that possible? Maybe this will segue into our last part of the conversation. We have a very good representation of the of the US population in our survey both in terms of age, in terms of income, in sales of geography. So I think you know this is representative of of the of the American population. Uh well let's end on this note. How is the survey conducted just high level? What is the methodology? So it's an online survey. Uh we are working with the partners. They have um they have a huge uh panel of uh US consumers and every every month they survey 3,000 of them. uh they so we are trying to avoid the same people responding every month so that we you know we can s we take a different sample every month uh we publish primary preliminary results um towards the end of the month before the month is finished. So we have when we publish it's a preliminary assessment and then we add you know the last week uh and we get the we get the final and that we publish with with the next month's release. Okay I understand. Thank you very much. Uh Stephanie tell us more about where we can uh find more information about the conference board and your research. Oh you need to go to our website. Um just Google conference board. Uh and even better if you go and if you Google conference board consumer confidence I mean you will find us very easily and and roughly how many people are represented in the survey each month? Well 3,000 consu uh but it's a representative sample of the US population. Yes. So uh all right we'll put the link down below and uh we'll see you next time. Stephanie, thank you very much for your time today. Thank you. Then thank you for watching. And don't forget to like and subscribe.
Calm Before The Storm? What Shocking Consumer Confidence Data Reveals | Stephanie Guichard
Summary
Transcript
consumers displayed some optimism already like November, December and then slowly this year I deteriorated and we had a massive deterioration in April. It's pretty scary because you see that you we still have twoird of consumers that are expecting a recession. Today we're diving into economic data, consumer confidence and leading economic indicators by the conference board. It's a research organization that produces economic indicators that are widely considered by mainstream economists to be one of the definitive indices for forward-looking economic growth projections. These indicators offer crucial insights into where the economy is currently at and where it's headed. And I'm pleased to be joined today by uh one of the architects of the of the indices, Stephanie Gisha, senior economist for global indicators at the conference board. Welcome to the show, Stephanie. Good to have you here. Yeah, thanks. So, I'm very happy to be here. Let's start by talking about the latest numbers, consumer confidence for uh July um as published by the conference board. I'll pull up these numbers here. If you take a look at my screen, you'll see that uh in uh July, the conference uh board produced uh numbers that uh showed some improvement in the uh consumer confidence. So, it improved by two points to 97.2, up from 95.2 in June. However, it still rests below last year's consumer confidence level. Meanwhile, the present situation index, it's based on consumer's current assessment, uh fell by 1.5 points while the expectations index, which is a forward-looking um index uh rose by 4.5% uh 4.5 points rather. So, before we get into the details, just give us a summary of the current situation. How strong or weak is the economy based on these numbers? So and maybe you should uh show the chart uh as you numbers. I think this is a you know this is kind of showing the you know if it was really a roller coaster this year for consumers. So uh confidence reach a peak at the end of last year. Uh it was uh we you know uh consumers displayed some optimism uh already like November, December and then slowly this year it deteriorated and we had a massive deterioration in April uh right after you know liberation day people started to get extremely worried about uh prices and the impact of tariff on prices. And how do we know that? We know that because we not only we do the survey but we ask consumers what is driving your view of the economy and it was really the thing that that came on top of their mind since then. So it recovered in May but now it's very stable and it's stable a bit below uh the low points of the past two three years. So I would say you know consumers are very cautious and it's important for the US economy because you know consumption is was driving GDP and we haven't seen a massive slowdown in consumption but when consumer are worried there is a chance that you know may they may be more cautious about their spending going forward. Uh so that that's that's where we are and it's kind of a wait and see situation. There is no super clear direction. Uh and I think that's fair to say it's uh kind of in between historically uh how accurate has this consumer confidence index be uh been in predicting actual consumer spending in the economy. So what it does is uh it helps predicting consumer spending for a given level of employment, a given level of income, a given level of interest rate. So you know consumption is driven by what consumers have in their pocket and whether they have a job or they are worried about losing their jobs and so on you know you need to think about when you forecast consumption like what are the core driver of consumption okay and everything else being given if consumer confidence is low they're going to be spending less if consumer confidence is high they're going to be spending more so this is how it plays place. So you don't have a onetoone match between consumer confidence and consumer spending but consumer confidence helps you uh to refine brings you more information about what consumers are going to be doing given the current environment. So I would say you know everything being equal if consumers were super optimistic even for the current income they are getting they would be spending less. If they were very pessimistic they would sorry if they were super optimistic they would be spending more. Very pessimistic they would be spending less. At this point they're kind of in between. Uh so it it's really a wait and see but uh you need to dive into the components to see a bit more what is driving uh the assessments of the economy. Yes, let's talk about uh that. So let's talk about the components. Are you surprised first and foremost that uh despite tariff uncertainty and the ongoing trade wars uh that are still happening around the world consu this consumer confidence index has been seeing an uptick. So we saw the I mean the uptake is very interesting. It started after um May 12 and the deal between the US and China. And we know that because when we did our May survey uh we collected data for the world and we had May 12 kind of uh in between uh the the the sample. So we were able to see that there was a faster improvement in consumer confidence after May 12 when they realized that you know uh there was this descalation of trade tension between the US and China. So this has clearly helped uh pushing consumer confidence up after the big worry of April. Uh however you know it has stabilized because they are still very concerned. Okay. Um I want to point something out here. So um this let me just pull this up once more. Uh so we're looking at right now at the consumer confidence index uh which as you can see has been ticking up slightly. However, if you take a look at the US leading uh uh economic indicator that has been steadily falling and so why is it that the leading economic indicator which you know factors in a lot of components including trade sales, industrial production uh among other uh uh components, payroll, employment, personal income um why has that been falling at the same time as consumer confidence slightly improving? Can you explain this disconnect here? Yeah. So, uh, consumer confidence is part of the index. Uh, and but it's, uh, and if you go down, you have the breakdown of the different components. Uh, so you're going to see, uh, one that is called average expectation uh, of business conditions. So, it's taking the expectation component of our index. So it's one of the sub component and it's also not only taking ours but because we wanted to make sure you know we have a broad view of the economy it's also taking into account the Michigan survey and their expectation index about uh um business conditions for both survey this has been very low. So uh basically yeah there is no discrepancy between the two when you look about uh consumer index it has five components. Uh the business condition is one of these components. It has been weak for some time and you can see in this chart that this is one of the indicators that is putting down um the the USI. Another indicator that is putting down the USDI are the orders in the manufacturing sector uh and this is not surprising because of the tariff situation and the worried about you know world trade global economic growth. So and we saw that the manufacturing sector which had rebounded in recent months is is taking a hit again. So this if you look at especially you know the last publication uh these were the drivers and then if you look historically for the past six months it was again these two drivers consumer expectation and manufacturing orders. Okay. Um one more question on the lei uh before we move back to the um consumer confidence indicator. So the recession signal was indicated by these horizontal red lines here that's been triggered several times since 2023. So why no official recession? Well, because um first one of the indicators that has really uh pushed the AI down which is not the case anymore but in 2023 2024 is the yield spread. So you know the difference between long-term rates and short-term rates. Historically, this was the magic indicator to predict a recession. And remember two years ago when the yield curve inverted, everyone started to talk about a recession. It's one of our indicator. And this one has we've been really putting an indicator down. So that's okay. So this one failed. Uh there was no recession. But traditionally when the gift card inverts you get a recession that the other thing is our indicator is heavy on manufacturing. uh so especially you know we have the manufacturing orders and I think you know there was a manufacturing recession but there was no service recession so there were no recession for the economy overall however what our indicators captured was that you know the manufacturing was uh was in trouble in 2023 2024 it came out of trouble end of 2024 I think it may be back there now but so this is captured by our indicators this This is the way it was built. Um service sector is very difficult to capture with macroeconomic data. This is something we working on. But so far I mean it capture more the manufacturing recession then if you have this if you have very concerned consumers because consumer expectations have been very weak in 2023 2024 and on top of that you have a negative yield curve. This is what has driven our index. Okay. Uh, one interesting note um, regarding inflation I'll bring up. It says here um, according to this report that consumers average 12 month inflation expectations eased slightly to 5.8% down from 5.9%. Well, that's still significantly higher than what we currently have. I mean, are these expectations realistic? Okay, so um, consumers expectations for inflation are always higher than the CPI. And what you need to realize is I mean the you know the CPI the or even the PC the indicators we are following they are but they are built on baskets of you know everything that the consumer is buying but consumers they the basket they think about when you ask them about inflation is more something that's you know it's the price they see on the day-to-day basis is the when they go to buy gas when they go to buy eggs when they go to buy groceries they think about these prices they they basket the way they think about inflation is different from our index so this is and the gap has existed historically it's just that they are not they are not thinking in term of CPI they're just thinking how much I paid today when I did my grocery and this is affecting the expectations okay well again um these expectations ations for inflation. Have they historically been accurate in projecting the direction of inflation? So, let's say consumers are expecting 12 month inflation to fall slightly. Does that historically mean that inflation will actually fall slightly? Not necessarily because these are I think they are these are very adaptive expectations. So it's more based on how much uh how much they are paying than how much they expect to pay. That said, it brings some information because you know if consumer are worried about prices, this is very important uh rel when you related to their spending behavior and um and you know when there is a shock I mean when there is like you know a shock to the economy uh they may anticipate like you know an price shock they anticipate the impact right away. in this type of circumstances there is a great correlation with what's happening to inflation afterwards because they know that historically when you have a you know I don't know an energy shock then they're going to get more uh they're going to pay more when they go to the gas stations and then this is going to be reflecting the CPI too. So it works both ways. So part of it is adaptative expectations and part of it is they they see what's happening in the economy and it also helps uh anticipate what's going to happen to inflation. Okay, this is interesting. Um and this is something that I think a lot of my viewers would be interested in knowing. July consumers outlook on stock prices rose from April's for uh 16-month low 47.9% expecting stock prices to increase over the next 12 months up from 37.6%. 6% 3 months ago. What's contributing to this higher bullish sentiment, Stephanie? Well, it's the recovery on the stock market. Uh so, um again, consumers when they b their stock price expectations, they look at stock prices today and think, oh, okay, it's going well. They also follow the news. So, they follow earnings, at least the ones who have stocks, they they follow earnings. And I mean, it's uh they see like the the improvement in the stock market. And it's also um you know the all the world discussion about tariffs they saw that it's not as bad as what they thought because April was already a low point in term of consumer stock prices expectations uh and since then the situation has improved. So they started to reverse uh the um the expectations about stock prices. They are not back where they were earlier this year. At some point it uh we we we reached a record high in term of consumers expecting stock prices to increase at the very beginning of the year and uh but it has it has weakened since then. So it's how they view the economy what they see in terms of stock prices and then uh they listen to the news. Okay, that makes sense. A special question asking consumers about the direction of various interest rates suggested that they largely believe mortgage rates, auto loan rates, and credit card rates were more likely to rise than other types of interest rates. That's interesting. The the expectation for uh the Fed funds rate at least is that the Federal Reserve will likely uh keep rates and change if not lower rates for the remaining of the year. So, I'm wondering why consumers are, at least in this survey, expecting consumer rates to rise. Uh, they also expect the Fed rates to rise, by the way. Um, but not as much as those rates. So, they are kind in the same um they expect the Fed to hike rates this year. They see all the rates moving in the same direction. uh but more seeing uh this rates increasing and this may be due to the the real concern they have about the impact of tariff on inflations and so but because they know that you know if if tariff results in higher prices they are more likely to see an increase in interest rate than a decrease and it's it's it's a concern and it's also uh when you think about the you know the the mortgage rate, the auto loan rates, the credit card rates. It's also a concern that, you know, um maybe about their financial situation, maybe a deterioration in their credit score, they they're going to be paying higher rates even though, you know, even if the Fed doesn't increase rates, they may be asked to pay higher rates because they uh credit scores are deteriorating. And this is something they take also into account. Uh this is important. and purchasing plans for cars and homes declined in July. Uh dining out was also one of the categories seeing the largest decline in spending intentions in July along with transportation and lodging related to personal travel. Consistent with these findings, vacation intentions were also down when consumers spend less on discretionary items like cars, vacations, dining out. Uh Stephanie, is that usually an indicator for an economic slowdown? A leading indicator that is. It could be. I mean it means that it shows that they are stretched. Um so it when they start think what they think about uh you know cutting discretionary saving it means that they are stretched. However, the real test is whether they're going to start with when they start cutting on uh nondiscretionary spending because this is, you know, this is when the economy is is in really bad shape is when you start cutting on the things that you really need like like food at home for example. Yeah. For instance, when you start, you know, to say, I'm going to try to cut on, you know, health care, uh, food at home. Uh, we we have some other examples of, uh, I I don't Are you seeing any evidence of that happening? Consumers cutting down on, um, things that usually have a, uh, inelastic demand? No, we don't see it now. We haven't seen it. I mean, we don't see it in spending intentions. Um so just going back to uh these discretionary items here. So if they plan to I if they if they plan to spend less of that um why are they worried about um you know their their spending because like we talked about earlier inflation expectations are coming down and confidence is up a little bit. So I'm just curious why even though confidence is slightly up and inflation expectations are down, people are still expecting to spend less money. So you need to I mean you you are thinking in terms of small changes but you need to look at the big picture. So overall yes consumer confidence is up but it's lower than what it was last year. Okay. Inflation expectations are slightly down but they are higher than they were a year ago and overall so consumer are more concerned than they were a year ago. And uh so they when you ask them are you going to spend more uh going out going on vacation they say no. That said, it it has happened last year that they tell us, "No, we're going to be saving because we are worried and when you look at the consumption data, they're still spending." And you know, uh, US economists, we're always surprised by how much the US consumers are spending, they as you know, as long as they have a job, as long as they have an income, typically they spend, even if they tell you they're not going to spend, at the end of the day, they still open their wallet. So that's you know that's the upside risk to everything here is that these are intentions this is confidence uh they may still continue to spend right so what are their expectations for employment uh are they expecting to keep their jobs are they expecting any changes to their wages and for those out of the labor force are they expecting to find a job anytime soon so the way we ask the question we're asking there are two questions that are related to that. The first one we're asking consumers uh going forward is it going to be easier or more difficult to find a job? And on that one they are really pessimistic. So they think that it's going to be more difficult to find a job 6 months from now. Okay. So uh and when they answer this question they think about themselves, they think about their kids. They think about their relations. if they uh you know they about people going to the job market or even they think okay if I quit my job today it's going to be more difficult for me to find a job than it was few months ago if I quit my job in 6 months okay maybe I will struggle to find something else however when we ask about the seven question what do you think about your income 6 months from now they are positive so they think that the labor market is going to deteriorate rate. They think that people looking for jobs are going to struggle more to find a job. However, they don't seem to be very concerned about their own income, which means that they are not very concerned about their own jobs. So, for now, they are not worried about losing their jobs. And that's very important because in April when we saw this dramatic collapse in confidence, the income indicator went negative. So in April when everyone panic they thought that okay there is a chance I'm going to lose my job which was reflected in pessimism about future income. It didn't last. They are back in optimism territory. So they're not worried about losing their job. They just think that you know the labor market is going to be uh less robust than it is currently and if you are on the market for a job it's going to be more difficult. Yes, this is the uh current financial situation for families. Can you um help us evaluate uh famil family's current financial situation now in 2025 versus a few years ago? How has this changed? So, and this is a new this is an indicator that we put out in 2022. So, we don't have you know the world story we have for the other ones. Uh so um we know we don't have the same we don't know what's the bottom and we don't know what's the high point. Uh but other this like three years of data what what we see right now it's they're quite optimist I mean they're quite happy about the current financial situation. it uh it's not like it's among the high points that that you see on this picture if you look at the yellow bar which is the difference between the two lines. So it's positive and it's relatively high. Uh it includes you know what they think in terms of their income but also potentially their stocks. uh and uh so far so good uh in terms of their current family financial situation right and uh just going back to uh what we were talking about earlier about recession uh likelihood and probabilities uh I wonder if this is a coincident indicator with other things um the likelihood of a recession perceived likelihood of a recession has been coming down certainly there's been less interest of recession talks on media uh so Yeah, I'm I'm curious to get the actual assessment and I'm curious how this relates to the LEI like I mentioned, right? The the the recession indicator has been flashing for quite some time, but yet like this indicator and other indicators show people are less concerned about it. So can you explain this discrepancy here between this and that? So again, so this one is is a recent indicator. So we don't have the full the fully story that you can see on the on the AEI chart. um what we focus on are the changes. So if you focus on the level it's pretty scary because you see that you we still have twoird of consumers that are expecting a recession uh which I mean you know and it's it's been above uh 60 since we started to ask the question. So it's I mean you could say it's high it's very high and it's completely uh in line with the AEI because both of them are talking about recession but that's not the way we interpret this data. So we just we see it as you know an indication about concerns about the economy uh in general recession talks of course. So when everyone started to talk about a recession uh in 2023, it spiked. Then the recession talk slowed, went down and we see it again. Uh people were started to be concerned about the recession when the discussion about the tariffs came back and then so there was it increased. It spiked in April and since then it has slowed down. It's still higher than last year. uh this is really consumer sentiment and um it's it's a very different indicator than uh than our to what extent is this uh a sort of a self-fulfilling prophecy so to speak. So if let's say a majority of consumers surveyed like 20 2/3 in this case expect a recession and they also expect to spend less on big ticket items. Does that not cause a slowdown? Because if they expected they spend less and then that causes the slowdown. Yeah. If it was the case, we would have had the recession in 2023 2024. It didn't happen. That's the question. The second is and again that's when you ask the consumers this type of question that yes the world is everything is bad you know I'm concerned I'm worried but then when they go to the store they open their wallet it's kind of two different person answering the survey and going to the store so I I don't think especially on this recession question that is relatively new and on which we don't have so much history I wouldn't take it as you as especially as um some you know autoization realizing expectation. So we've talked a lot about consumer's confidence um I'm curious what uh CEO confidence is like and how they compare to consumer confidence. So we have the CEO survey it's quarterly so you don't we don't take the purse of CEO uh every month we just take it every quarter. They were if we look at this year. So we did our first survey in February. They were extremely optimistic like the most optimistic they had been for a few a few years. Then we did our second survey uh in May. Uh and then they were the most worried they had been in the past few years. uh and we just uh published the third one of the year last week and it kind of stabilized into at a neutral level. So basically, you know, they went from super optimistic to super pessimistic to kind of neutral and cautious. And I I don't know if you have the um the charts here that you could display because we were just talking about recession and in our press release we also show their recession expectation and it's jumped to over 80% in May and now it's back to 35%. Oh yeah, we can uh we can look for that chart and put it up later. Uh so I I wonder why uh there's been this big disconnect between how CEOs feel and why and what consumers feel. Is it is it is it simply because CEOs are more wealthy? Is that the only reason? No, we had we are see about their business. Uh and I don't think there is a disconnect. And they both declined a lot uh in May in I mean consumers in April CEOs in May because we didn't do any survey between February and May. So it was the low point and they have both recovered uh and they are both recovered to a level that is better than the low point but not as high as last year. So I think there are kind of uh I would tend to think you know if you if you accept that we don't do the CEO survey every month so we don't have you know the same time series they kind of track each other and they are both in a very kind of cautious wait and see mode both the CEO and and and the consumers it's not as bad as earlier in the spring but it's not as good as last year. Okay. One new development uh well, it's not new, but it's it's a recent development, shall we say, is the return of student loan uh debt and and and payments. So, the Trump administration has reversed the uh the Biden administration's uh pause on student loan repayments. Uh a lot of people understandably are very concerned. This is from the Guardian. Um they've interviewed some people who says that uh they've they're already missing loan repayments and they cannot afford this. Um and now all of a sudden this colossal debt that was previously pardoned is now coming back. How is this going to change consumer spending do you think? Have you have you have you surveyed people about this issue? Yes. Yes, we did. So we we asked uh consumers uh in July uh first we asked them I mean do you still have now starting student loan or not? And for the ones who had the student loans that they had to service, we asked them about uh whether they were concerned about the uh recent changes in the in the loan program to affect their ability to spend and almost half said yes, this is going to affect my ability to spend. uh we asked other question about whether it could affect their ability to take new loans uh to service the other loans and they I mean we had like between I don't have the exact number but between 35 and 40% saying yes uh so I believe and also you know if if the the payment they need to do for the student loans affect their ability to service the other loans it's a potential way of um you know the delinquency to spread to some other credit lines um you know if consumers because they they decide okay I'm going to pay the student loan then you I can't pay the other loans so it could uh kind of spread uh the difficulties across the financial system uh they're also concerned about their credit scores because you know uh for the past five years if you didn't pay your student loans it couldn't affect your credit score now is going to affect your credit score for and your ability to take new loans. So these are things that are worrying consumers. However, uh you ask me about you know the impact on consumer spending. I mean this is not affecting every single consumer in the economy. It's uh you have less than 20% of the US population who has a student loan to service. So you already decline you know and not of them are in default is just another headwinds to uh you know it's adding to the headwinds to uh consumer spending uh alone I mean if it was the only thing that's happening in the economy it wouldn't have much of an impact because there are more things happening in the economy because consumers are worried about inflation because uh we have the impact of tariffs because we see labor market footing. Uh this is just adding to the other factors. So overall then given all the surveys and indicators that we've looked at so far, how would you and your colleagues assess the financial conditions of the average consumer now and into the end of the year? Do you expect improvement, deterioration or no change between now and the end of the year? I mean we are still waiting to see the impact of tariffs feeding through inflation. This is affecting consumer finances. um we don't expect a major deterioration of consumer finance uh this year. I think you know uh we are watching what the Fed is going to do. We see a potential for a cut towards the end of the year uh as the economy slows. Uh so we know that you know debt is high but um it's still manageable and consumers still have income you know as long as they have income as long as they are jobs they're able to continue servicing their loans so we are not a necessary concern so far are are I know this is very difficult to assess but generally how often are consumers actually right about their own expectations versus incorrect. Uh that's hard to say. I think it's the the question is not whether they are right. The question is whether they act according to their feeling and it seems you know they they're worried but they still spend. They're worried that they you know they're worried about the economy in general. They're worried about inflation but they have been spending for the past two years. they were they were worried 2023 2024 they were worried about the economy there was planning so it's more like an um it's an internal uh you know discrepancy between what they say and what they do because a year ago we had the survey we asked them interests are high inflation is high are you going to save more they said yes then we did look at the inflation the consumption data consumption is up so Um that I think that that's where you know that's what makes it difficult to assess. Yeah, that is interesting. Uh maybe maybe it's not the same people that are spending money versus the same people surveyed. Is that possible? Maybe this will segue into our last part of the conversation. We have a very good representation of the of the US population in our survey both in terms of age, in terms of income, in sales of geography. So I think you know this is representative of of the of the American population. Uh well let's end on this note. How is the survey conducted just high level? What is the methodology? So it's an online survey. Uh we are working with the partners. They have um they have a huge uh panel of uh US consumers and every every month they survey 3,000 of them. uh they so we are trying to avoid the same people responding every month so that we you know we can s we take a different sample every month uh we publish primary preliminary results um towards the end of the month before the month is finished. So we have when we publish it's a preliminary assessment and then we add you know the last week uh and we get the we get the final and that we publish with with the next month's release. Okay I understand. Thank you very much. Uh Stephanie tell us more about where we can uh find more information about the conference board and your research. Oh you need to go to our website. Um just Google conference board. Uh and even better if you go and if you Google conference board consumer confidence I mean you will find us very easily and and roughly how many people are represented in the survey each month? Well 3,000 consu uh but it's a representative sample of the US population. Yes. So uh all right we'll put the link down below and uh we'll see you next time. Stephanie, thank you very much for your time today. Thank you. Then thank you for watching. And don't forget to like and subscribe.