Washington has enjoyed two consecutive months of forecast-beating revenue collections. The Economic Revenue and Forecast Council has said that the higher collections can be attributed to “higher-than-anticipated taxable activity in retail trade.” The ERFC adds, ” It remains to be seen whether the increased retail activity is sustainable or just the result of a temporary release of pent-up demand.”
That’s the context for seeing another caution flag in the latest Conference Board report on consumer confidence.
The Conference Board Consumer Confidence Index® decreased in August, after declining in July. The Index now stands at 84.8 (1985=100), down from 91.7 in July. 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.
The implications are clear.
“Consumer Confidence declined in August for the second consecutive month,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “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.”
The Associated Press reports,
U.S. consumer confidence fell for the second consecutive month, sinking to the lowest levels in more than six years as a resurgence of COVID-19 infections in many parts of the country heightened pessimism…
Because consumer spending accounts for 70% of economic activity in the U.S., a drop-off in confidence gets a lot of attention from economists.
…“Consumer confidence has now taken two steps back after one giant step forward in June,” said Jim Baird, chief investment officer at Plante Moran Financial Adisors. “Initial hopes for a faster return to a pre-pandemic normal have faded.”
Next month’s collections report will provide some indication of whether Washington consumer spending has begun to taper off. Perhaps Washington will buck the trend. But concerns about sustainability of the sustainability of the retail activity that lifted revenues above forecast remain valid.