U.S. Consumer Confidence Waned in August on Delta Variant Fears

August 31, 2021 at 10:36 am EDT

By Xavier Fontdegloria

Consumer confidence in the U.S. deteriorated sharply in August as the spread of the Covid-19 Delta variant and concerns about inflation soured households' mood.

The consumer confidence index decreased to 113.8 in August from a downwardly revised 125.1 in July, data from The Conference Board showed Tuesday.

The reading misses economists forecasts, who polled by The Wall Street Journal expected the indicator to decrease to 123.1.

The decline in August places the index at its lowest level since February, after several months of gains that shot up confidence to broadly recover to pre-pandemic levels.

"Concerns about the Delta variant--and, to a lesser degree, rising gas and food prices--resulted in a less favorable view of current economic conditions and short-term growth prospects," said Lynn Franco, senior director of economic indicators at The Conference Board.

Consumer confidence hints Americans' willingness to spend on goods and services, which is a major driver of the U.S. economy.

Spending intentions for homes, autos and major appliances all cooled, but the percentage of consumers intending to take a vacation in the next six months continued to climb, Ms. Franco said.

"While the resurgence of Covid-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending," she said.

The present situation index, which reflects consumers assessment of current business and labor market conditions, fell to 147.3 in August from 157.2 in July. The expectations index, which gauges short-term outlook for income, business and labor market conditions, dropped to 91.4 from 103.8 the previous month.

Another consumer sentiment survey carried out by the University of Michigan showed that Americans sentiment deteriorated in August to a 10-year low due to the Delta variant spread and inflation fears.

The Conference Board measure's more moderate drop can be attributed to the fact that the index is heavily influenced by employment trends and the labor market remains strong, economists say. The University of Michigan's gauge relies more on consumer purchasing power and financial conditions, which have been hit by rising prices.

"While the gap [between both indexes] may have narrowed a bit in August, that consumers still feel strongly positive about labor market conditions should put a floor under the confidence index," Richard F. Moody, chief economist at Regions Financial Corp., said in a note to clients.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com