A key measure of U.S. consumer confidence remained near a 19-year high in August, defying some economists’ fears of a possible recession.

The Conference Board’s Consumer Confidence Index fell slightly, to 135.1, from 135.8 in July, but the minimal decline showed that consumers still have a lot of faith in the economy.

“Consumer confidence was relatively unchanged in August, following July’s increase,” Lynn Franco, senior director of economic indicators at The Conference Board, stated in a press release. “Consumers’ assessment of current conditions improved further, and the Present Situation Index is now at its highest level in nearly 19 years. Expectations cooled moderately, but overall remain strong.

“While other parts of the economy may show some weakening, consumers have remained confident and willing to spend,” she continued. “However, if the recent escalation in trade and tariff tensions persists, it could potentially dampen consumers’ optimism regarding the short-term economic outlook.”

The Conference Board’s findings were in sharp contrast to the results from the University of Michigan’s Consumer Sentiment Index, which fell to 89.8 in August from 98.4 in July. The drop of 8.6 points marked that index’s largest monthly decline since December 2012.

Richard Curtin, director of the university’s Surveys of Consumers, attributed the decline to tariffs levied by President Trump; one in three consumers in the university’s monthly survey mentioned the tariffs, and Curtin said the data showed consumers could be “pushed off the tariff cliff,” leading to slower growth in consumption.

“Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs,” Curtin stated in a press release. “Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home.

“The August data indicate that the erosion of consumer confidence due to tariff policies is now well underway,” Curtin added. “Compared with those who did not reference tariffs, consumers who made spontaneous negative references to tariffs also voiced higher year-ahead inflation expectations, more frequently expected rising unemployment, and expected smaller annual gains in household incomes.”

On Sept. 1, the Trump administration imposed new tariffs of 15 percent on about $300 billion in Chinese goods, including consumer products such as clothes, shoes and household appliances, including desktop computers.

The concern among economists and some U.S. businesses is that the new tariffs might curb consumer spending in the coming months. China has placed retaliatory tariffs of 5 percent to 10 percent on $75 billion of U.S. imports.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was still strong in July. The U.S. Commerce Department reported that it rose 0.6 percent.

“Even with elevated policy uncertainty and financial market turbulence, the U.S. consumer continues to display great vitality, emboldened by a large savings buffer,” Lydia Boussour, senior U.S. economist at Oxford Economics in New York, told Reuters.

Federal Reserve Chairman Jerome Powell said on Aug. 23 at the annual Fed conference that the economy was still in a “favorable place,” but that the central bank would “act as appropriate” to keep the economy on track for continued expansion.

The combination of higher consumer spending and low inflation set up the Federal Reserve for a possible cut to interest rates in September.

Inflation through August remained tame. As measured by the Fed’s preferred gauge, the Personal Consumption Expenditures Price Index rose just 0.2 percent in July. The yearly rate was up slightly to 1.4 percent.

Alastair Crawford, chief executive of Connecticut-based Boat Fix, a telematics service for boat owners that includes technical assistance, vessel management and security, foresees slower growth for the economy.

“While the underlying U.S. economy is probably a lot stronger than many give it credit for, the signs of some type of a slowdown seem clear,” Crawford says. “Even in a challenging market, we see opportunity based on the fact that we provide the boat owner with safety, security and — most important of all — service. With over 90 percent of boats being under 26 feet, Boat Fix has purposefully positioned and priced its 24/7 service to be affordable to even the most modest boat owner.”

Crawford says he watches a variety of economic indicators, such as job gains, the housing market and consumer confidence and spending.

“It is always a combination of these metrics, especially consumer confidence, but it is also about discretionary spending,” he says. “Need versus want. Our aim is that Boat Fix and its 24/7 support service will put it firmly in the ‘need’ bracket. And that trumps — excuse the pun — all.”

Crawford says Boat Fix has only been offered on a business-to-business basis this year, but that business-to-consumer sales will launch within the next few weeks.

“On a B2C level, we see an enormous need for better customer service and support for boat owners,” he says. “There has been exciting growth in this space over the last few years, but it is still in its infancy. Boat Fix is well poised to dominate in this sector.”

Crawford says the effects of Trump’s tariffs on his company “have been fairly minimal, largely because Boat Fix is predominantly a service business, and hardware is a small part of our overall offering.”

His optimism is shared by other businesses as well. Confidence among the nation’s small businesses improved in July. The Small Business Optimism Index of the National Federation of Independent Business rose 1.4 points, to 104.7, as seven of its 10 components advanced.

“While many are talking about a slowing economy and possible signs of a recession, the largest economy in the world continues to defy expectations, generating output, creating value, and expanding the economy,” NFIB President and CEO Juanita D. Duggan stated in a press release. “Small-business owners want to grow their operations, and the only thing stopping them is finding qualified workers.”

The July survey showed that owners’ plans to create jobs and make capital outlays advanced, and earnings trends improved. Expectations for better business conditions increased 5 points, and the number of respondents who reported the current period as a good time to expand advanced 2 points.

In the housing market, builder confidence for newly built, single-family homes rose 1 point, to 66, in August, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

The NAHB reported that sentiment levels have been at a “solid” level of 64 to 66 during the past four months. Any number over 50 indicates that more builders see conditions as good rather than poor.

“Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots,” NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Connecticut, stated in a press release.

The Housing Market Index gauging current sales conditions increased 2 points, to 73, and the component measuring traffic of prospective buyers rose 2 points, to 50. The measure charting sales expectations for the next six months fell 1 point, to 70.

“While 30-year mortgage rates have dropped from 4.1 percent down to 3.6 percent during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns,” NAHB Chief Economist Robert Dietz stated in a press release. “Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.”

Despite lower mortgage rates, new-home sales fell more in July than economists were expecting, dropping 12.8 percent from the previous month to a seasonally adjusted annual rate of 635,000. The monthly decline was the largest since July 2013.

In an encouraging note, June’s sales were revised upward from 646,000 units to 728,000, and sales in July were 4.3 percent higher than they were in July 2018.

Existing-home sales were more positive, rising 2.5 percent in July from June to a seasonally adjusted annual rate of 542,000, the National Association of Realtors reported.

“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” Lawrence Yun, the NAR’s chief economist, stated in a press release. He added that the supply of affordable housing is very low: “The shortage of lower-priced homes [has] markedly pushed up home prices.

“Clearly, the inventory of moderately-priced homes is inadequate, and more home building is needed,” Yun added. “Some new apartments could be converted into condominiums, thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration mortgages to buy condo properties.”

The NAR reported that the median existing-home price in July was $280,800, up 4.3 percent from July 2018. July’s price increase marked the 89th consecutive month of year-over-year gains. 

This article originally appeared in the October 2019 issue.