Foodservice Equipment Reports

Wall Street Woes Hardly Affected Consumer Confidence In January

Last issue, we analyzed what impact the steep recent decline of equities markets in the U.S. and worldwide might have on foodservice and equipment and supplies sales. One possible scenario is that the drumbeat of negative market news will depress consumer confidence, slowing foodservice sales.

Not so far. Both the University of Michigan and The Conference Board released their widely following indicators of consumer confidence last week. The UM Consumer Sentiment Index ticked down a mere 0.6 point to 92, while The Conference Board’s Consumer Confidence Index actually rose 1.8 points to 98.1.

“For now, consumers do not foresee the volatility in the financial markets as having a negative impact on the economy,” said Lynn Franco, director of economic indicators at the Board. She said the research group’s Expectations and Present Situation indexes also rose in January.

UM did say the slight decline in the Sentiment Index was “due to stock market declines that were reflected in the erosion of household wealth as well as weakened prospects for the national economy.” As we mentioned two weeks ago, wealthier households use foodservice more and are also more likely to be affect by the market declines.

Ironically, factors that have helped push down equities prices is also one that has propped up consumer confidence: very low inflation and the plunge in energy prices and stocks. UM Surveys of Consumers Chief Economist Richard Curtin said “it has been very low inflation rates that have maintained inflation-adjusted income expectations at the highest levels since 2007.” And like the stock markets, he worries the recent interest rate gain by the Federal Reserve could undercut those expectations and lead to a cut-back in consumer spending.

The Federal Reserve issued a statement last week expressing concern about the volatility in the financial markets. But it didn’t indicate a clear direction on interest rates going forward, which only seemed to confuse the markets. Fed Chair Janet Yellen is scheduled to address Congress Feb. 10 and will almost certainly make it more clear the Fed’s position on interest rates.

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