Consumer confidence index

The Consumer Confidence Index was in the doldrums ever since the dot com bubble burst; however, the index fell further starting in late 2007 before plunging precipitously in 2008. The sharp drop was triggered by the collapse of two stalwarts of the financial sector, Bear Stearns and Lehman Brothers, which revealed an unexpected weakness in the US economy and a bubble in the housing market. Consumer confidence deteriorated as Americans had their retirement accounts and savings crushed by plunging asset values.

Expectations for the future remained bleak by early 2009, with soaring unemployment dampening optimism across the nation. In the second half of 2009, a stabilizing housing market and stock prices regaining some of the ground lost during the collapse led consumer confidence to turn the corner. This trend of improving consumer confidence persisted through 2010 as the economy regained traction and companies reported renewed profitability, resulting in a 20.0% higher average in the Consumer Confidence Index compared with 2009. Moreover, the strength in consumer confidence in recent years has been encouraging. In the larger historical context, as the S&P 500 grew over the year, the Consumer Confidence Index has grown significantly, hitting its highest levels since prior to the dot com bust. However, confidence waned in 2019 as trade tensions increased and economic uncertainty increased as fears of an impending recession increased.

Consumer confidence decreased 21.1% in 2020 as a direct result of the COVID-19 (coronavirus) pandemic. The material effects remained largely uncertain over most of the year, which were slightly mitigated by vaccine rollouts and immunization mandates. Recovery accelerated in line with vaccination rates and business reopening in 2021, leading consumer confidence to increase 10.8% that year alone. However, the pace of this recovery has brough inflation pressures into focus. Across the United States, many consumers have experienced increased costs of living, especially among more volatile items, such as fuel prices. As a result, the Federal Reserve initiated a quantitative tightening policy during 2022 into 2023, which has had ripple effects into business sentiment, employment and debt service. Additionally, the global economic effects of the ongoing war in Ukraine and sanctions against Russia have further pressured confidence.

As a result of lingering economic concerns, consumer confidence decreased 7.0% during 2022. According to Reuters, a decline in confidence was especially concentrated in lower-income households, which were especially affected by higher grocery and gas prices. In a Fannie Mae survey posted by CNBC, consumer confidence relating to housing also revealed that only 16.0% of respondents thought that it was a favorable time to buy during 2022. Though growth in the labor market has helped to minimize this decline in confidence, the Federal Reserve's continued aggressive interest rate hikes have stressed consumers.

To counter inflation and US labor market imbalances, the Federal Reserve continued to raise rates during 2023, which stressed budgets for individuals and companies. After signaling a pause in rate hikes, the Federal Reserve increased its Federal Funds rate, aiming for a new target range of 5.25% to 5.50% during the year. Due to regional bank collapse news, rising gas prices and the Federal Reserve's decision to continue raising interest rates, consumer confidence remained limited during 2023, still rising 2.0% during the year. In 2024, consumer confidence decreased 1.6% as interest rates remained high for the majority of the year. The index will weaken in 2025, resulting from uncertainty over executive decisions about tariff policies established by the second Trump Administration as policies change from day to day.