Consumer confidence fell in August as the outlook for business conditions and the labor market deteriorated 70 days ahead of midterm elections.
The Conference Board’s measure of household confidence in the economy fell by 0.8 points to 89.4 after a downward revision to the prior month, according to a report released Tuesday.
The decline was entirely caused by a fall in the gauge of the outlook for the economy. Views of current economic conditions improved in August.
“Consumer confidence moderated slightly in August for a second consecutive month,” said Dana M Peterson, Chief Economist, The Conference Board. “The Expectations Index slipped further into negative territory, which was offset by a moderate rise in the Present Situation Index after declining in the past three months. Consumer appraisals of current business conditions were mildly positive. Perceptions of the current labor market improved, reversing three months of moderate decline. Looking ahead, consumers were more pessimistic about business conditions and the labor market over the next six months. Expectations for household incomes moderated but remained optimistic overall.”
The divergence between expectations and current conditions and the partisan breakdown points to a political explanation for the divergence between improving current conditions and a deteriorating outlook. Confidence weakened among Republicans and independents while improving among Democrats, a pattern consistent with growing expectations of a shift in political power.
Public opinion polls and election forecasts indicate that Democrats have a good chance of capturing the House of Representatives, with control of the Senate also in play. Democratic control of either chamber would likely stymie further progress on President Donald Trump’s economic agenda. Republican and independent consumers may increasingly fear that a shift in power on Capitol Hill would weaken business conditions, the labor market, and household prosperity.
Despite a recent rise in gasoline prices and a loss of jobs in July, the share of consumers who said jobs were plentiful rose in August, while the share saying jobs were hard to get fell. The gap between the two, a measure of household confidence in the labor market closely watched by economists, is the widest it has been this year.
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