Consumers Shun Big Purchases as Confidence Falls

Americans are planning fewer vacations and major purchases as consumers prepare for worsening conditions.

That’s according to the Conference Board’s monthly Consumer Confidence Index, which fell to 101.3 for April, the board said in a Tuesday (April 25) news release.

Also down was the board’s Expectations Index, which is based on consumers’ short-term expectations about income, business and the labor market.

“While consumers’ relatively favorable assessment of the current business environment improved somewhat in April, their expectations fell and remained below the level which often signals a recession looming in the short-term,” said Ataman Ozyildirim, the Conference Board’s senior director for economics.

Ozyildirim says consumers expect business conditions to worsen in the next six months and fewer jobs to be available in the short term.

“April’s decline in consumer confidence reflects particular deterioration in expectations for consumers under 55 years of age and for households earning $50,000 and over,” he added.

The report also showed consumer expectations on inflation for the next 12 months has remained unchanged at 6.2%, a number the board says is still elevated, though significantly lower than the 7.9% peak it achieved last year.

“Overall purchasing plans for homes, autos, appliances, and vacations all pulled back in April, a signal that consumers may be economizing amid growing pessimism,” Ozyildirim said.

That’s in keeping with recent PYMNTS research, which similarly shows consumers are more cautious about major purchases.

For example, 58% of consumers surveyed for the PYMNTS collaboration with LendingClub, “New Reality Check: The Paycheck-to-Paycheck Report,”said they were unlikely to purchase travel in 2023, including 9% who had spent on travel last year.

We also noted recently that while 46% of consumers say they have no plans to purchase electronics this year, that figure is lower than other categories such as new vehicles or expensive clothing.

“Multiple reasons may be behind this gap. Primarily, many everyday big-ticket items can quickly go from nice-to-haves to need-to-haves,” PYMNTS wrote. “Appliances can only go so long before needing to be replaced, after all, and even furnishings can go past the point of repair.”

Consumers’ feelings of pessimism are shared by small businesses, according to the latest edition of the National Federation of Independent Businesses (NFIB) Small Business Optimism Index, which declined in March due to inflation and trouble borrowing and finding workers.

“Small business owners are cynical about future economic conditions,” said NFIB Chief Economist Bill Dunkelberg. “Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.”