The parade of disappointing economic data continued this morning as Consumer Confidence for the month of February came in weaker than expected. While economists were already expecting a decline from January’s reading of 103.8 down to 99.5, the actual reading came in at 96.4. This was the largest one month decline in Consumer Confidence since October 2013. Although we saw a sizable decline in Consumer Confidence this month, the headline index still remains above its historical average of 93.3 dating back to 1967. The last time we saw back to back prints of above average Consumer Confidence was in October 2007.
As we have been highlighting over the last few years, the rebound in Consumer Confidence during this expansion has been uneven across different income levels. While confidence among higher income Americans is back to pre-recession levels, confidence among lower income Americans is still relatively depressed. The chart below compares Consumer Confidence levels of people with incomes over $50K to confidence levels of people with incomes between $35K and $50K, and clearly shows the widening gap in confidence during the current recovery. If you look closely at the shaded area of the chart, though, you can see that in February, the confidence gap narrowed. While confidence among higher income Americans fell from 125.1 down to 119.2, confidence among lower income Americans actually increased from 93.2 up to 97.2. That narrowed the gap from 31.9 last month to 22 this month.
Despite the narrower gap in confidence by income levels in this month’s report, the six-month average spread remains wide, and it only came in slightly. At a level of 31.53 this month, it is still at its second highest level since at least 1987. Wal-Mart’s (WMT) announcement last week that it would raise starting hourly wages for new hires probably helped to improve sentiment for lower income consumers, but it is going to take a lot more of that to have any meaningful impact on the wide gap in confidence levels.