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MARK-TO-MARKET: Consumer confidence dips as delta variant rises
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MARK-TO-MARKET

MARK-TO-MARKET: Consumer confidence dips as delta variant rises

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The Consumer Confidence Index is a key measure of consumer optimism. It is released each month by The Conference Board, a U.S.-based provider of economic data and analytics. The index has a benchmark of 100. Any level above 100 indicates an optimism by American consumers on their future outlook on jobs, income and the economy. Its relevance to Wall Street lies in the fact that consumer spending drives more than two-thirds of our nation’s economic growth. Simply put, optimistic consumers tend to spend their money more freely.

On Tuesday, the Consumer Confidence Index for August was reported at 113.8. Though it signaled that American consumers are generally still confident, it was well below Wall Street’s forecast of 123 and July’s reading of 125.1. August marked the lowest level of consumer confidence since February.

Since the start of the global pandemic, consumer confidence has tracked the ebb-and-flow of the number of COVID-19 cases. In April 2020, when government restrictions on businesses and consumers were at their peak, the Consumer Confidence Index plummeted from 118.8 to just 85.7. This marked a seven-year low for the index and snapped a 44-month consecutive string of index readings dating back to July 2016. For perspective, the record low for the index is a dreary 25, set in February 2009 during America’s subprime mortgage crisis. Conversely, the all-time high is 144.7 set in May 2000.

After the April 2020 fallout, Americans’ confidence began to gradually improve, and by October the Consumer Confidence Index had reached 101.4. But a second surge in COVID-19 at the end of 2020 once again sent consumer optimism on a downward spiral. Between November and February, the index languished in the high-80s to low-90s.

The proliferation of COVID-19 vaccines has had a sizable influence on America’s optimism. In June, the Consumer Confidence Index reached a post-pandemic high of 128.9. But the ongoing surge in the delta variant has begun to rattle that confidence. From June 1 to Aug. 26, the number of new daily cases of COVID-19 has increased from 9,346 to 179,578 — the highest daily total since January. It’s therefore little surprise the Consumer Confidence Index fell in both July and August.

It’s still too early to determine if the recent decline in consumer confidence will eventually result in lower consumer spending. But Wall Street knows the longer the decline, the greater the odds that consumer spending — and ultimately the U.S. economy — will be impacted. For now, at least, Wall Street is left hoping that the delta variant and the drop in consumer confidence are just temporary blips.

Mark Grywacheski is an expert in financial markets and economic analysis and is an investment adviser with Quad-Cities Investment Group, Davenport.

Disclaimer: Opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. Quad-Cities Investment Group LLC is a registered investment adviser with the U.S. Securities Exchange Commission.

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