The Conference Board's Consumer Confidence Index declined for the third straight month in February to 98.3, down from a revised 105.3 (previously 104.1) in January, and below expectations of 103.0 in the Econoday survey of forecasters. Consumers' assessment of current business and labor market conditions fell, while their short-term outlook for income, business, and labor market conditions saw a sharp dip.

In February, consumer confidence registered the largest monthly decline since August 2021, the report said, noting that [f]or the first time since June 2024, the Expectations Index was below the threshold of 80 that usually signals a recession ahead.

There are no bright spots in the report.

Of the five components of the Index, only consumers' assessment of present business conditions improved, albeit slightly, the report added. Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high.

The Conference Board said the share of consumers expecting a recession over the next 12 months rose to a nine-month high.

Average one-year inflation expectations jumped to 6 percent in February from 5.3 percent in January. This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs, the report said.

On a six-month moving average basis, consumers' purchasing plans for homes continued to recover, while their intent to buy cars as well as other big-ticket items were down in February. Overall, [c]onsumers' views of their Family's Current and Future Financial Situation were less positive, retreating from the series highs reached in January, the Conference Board said.

Forecasters see consumer confidence ebbing further to 103.0 in February from 104.1 in January and from 109.5 in December. Sentiment seems to have palled after rising to 111.7 in November from 109.6 in October and 99.2 in September. Inflation worries and concern about the economic outlook have been rising in the new year.

The Conference Board's confidence report surveys consumers on their assessments of the labor market, business activity, and their own financial conditions. The survey is conducted by Toluna, an online community platform. (Conference Board and Toluna)

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer confidence index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.