Economic Report: Consumer confidence dips in February on worries about high inflation

United States

The numbers: A survey of U.S. consumer confidence fell slightly in February to a five-month low of 110.5 from 111.1, as Americans remained somewhat unsure about the path of the economy in the upcoming months.

Economists polled by The Wall Street Journal had forecast the index to shrink to 109.5.

“Consumers remain relatively confident about short-term growth prospects,” said Lynne Franco, senior director of economic indicators at the board. While they do not expect the economy to pick up steam in the near future, they also do not foresee conditions worsening.”

Big picture: The smaller decline in consumer confidence than expected is a good sign, but Americans are still worried about high inflation. Fewer people plan to buy homes, cars, autos and appliances in the next six months, the survey found.

What’s more, the Federal Reserve plans to raise interest rates to combat inflation and that could also result in Americans buying fewer big-ticket items.

The good news? Coronavirus cases are falling fast, households are flush with cash and almost any American who wants a job can find one amid the worst labor-shortage in decades. Businesses are still seeing plenty of demand.

Key details: An measure of how consumers feel about the economy right now rose edged up to 145.1 points from 144.5.

A similar gauge that looks ahead six months dipped to 87.5 from 88.8.

During the pandemic, the index has ranged from a high 128.9 after a lull in the pandemic last summer to as low as 85.7 at the onset of the crisis.

Lately the index has drifted lower due to the delta and omicron outbreaks and a surge in inflation.

Looking ahead:  “Though inflation is high and a major concern for consumers, it hasn’t historically restricted spending,” said corporate economist Robert Frick of Navy Federal Credit Union. “With the omicron wave quickly subsiding and many states and cities lifting restrictions, we should expect spending, especially on services, to accelerate.”

Market reaction: The Dow Jones Industrial Average DJIA, -0.87%  and the S&P500 SPX, -0.67%  fell in Tuesday trades after Russia invaded part of Ukraine.