Consumer Payment Card News

Trade Tariff Tensions Dampening Consumer Confidence

Trade Tariff Tensions

Trade tariff tensions are among the mounting evidence the American economy is spiraling downward as consumers begin to lose the faith that all is good. With consumer spending making up two-thirds of the economy, when it goes down, the overall economy declines as well.

On a national level, consumer confidence started declining in July and continues through September. Florida consumer confidence is also another national bellwether, revealing the deterioration is spreading across all demographics.

In addition to trade tariff tensions, perhaps the most eerily reminiscent consumer behavior pattern is the accumulation of credit card debt. U.S. revolving debt has skyrocketed in three of the past four months. This is exactly the trend exhibited in late 2007 just before the start of the Great Recession, notes Robert McKinley, pro bono Senior Analyst for CardTrak, CardFlash and CardData.

National Consumer Confidence

For the second month in a row The Conference Board Consumer Confidence Index decreased. The September Index now stands at 125.1, down from 134.2 in August. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 176.0 to 169.0. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – declined from 106.4 last month to 95.8 for September.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, notes the escalation in trade and tariff tensions in late August appears to have rattled consumers. However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing.

Other Conference Board findings for September:

Consumers’ appraisal of current-day conditions was somewhat less favorable in September. Those claiming business conditions are “good” decreased from 40.9% to 37.3%, while those saying business conditions are “bad” increased from 9.9% to 12.7%.

Consumers’ assessment of the job market was also less favorable. Those saying jobs are “plentiful” decreased from 50.3% to 44.8%, while those claiming jobs are “hard to get” declined slightly from 12.0% to 11.6%.

Consumers were less optimistic about the short-term outlook in September. The percentage of consumers expecting business conditions will be better six months from now decreased from 21.6% to 19.0%, while those expecting business conditions will worsen increased from 10.2% to 14.3%.

Consumers’ outlook for the labor market was also less upbeat. The proportion expecting more jobs in the months ahead decreased from 19.9%to 17.5%, while those anticipating fewer jobs increased from 13.7% to 15.7%.

Florida Consumer Confidence

Consumer sentiment among Floridians plummeted 6.7 points in August to 93.3 from a revised figure of 100 in July. This sharp decline is in line with the University of Michigan’s reading for the U.S., which fell by 8.6 points. The last time consumer sentiment dropped more than six points was in May 2015.

The latest University of Florida Consumer Sentiment index reveals all five components that make up the index declined.

Opinions of personal financial situations now compared with a year ago decreased 9.2 points from 96.3 to 87.1, the steepest decline in this month’s reading. This opinion is shared by all Floridians across different sociodemographic groups; however, it is particularly stronger among women, those 60 and older, and those with annual income under $50,000. Similarly, opinions as to whether now is a good time to buy a major household item like an appliance decreased 5 points from 103.9 to 98.9.

“Overall, these two components indicate that Floridians’ opinions about current economic conditions have deteriorated in August,” said Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research.

U.S. Consumer Revolving Credit

U.S. revolving credit, (97% credit card debt), increased at an annual rate of 11.2%, compared to one-year ago, and follows a revised 0.2% YOY (year-on-year) decline in June and a revised 8.3% YOY and 7.6% YOY increase in May and April, respectively, according to RAM Research.

U.S. revolving consumer credit stood at $1081.2 billion at the end of July, compared to a revised $1071.2 billion for June, a revised $1071.4 billion for May, and a revised $1064.1 billion for April, according to the latest figures released by the Federal Reserve earlier this month. At the end of 2018, Americans owed a revised $1053.5 billion in revolving credit.