“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: California consumer confidence fell to an eight-month low in May as recession talk became part of the mainstream economic conversation.

Source: The Conference Board polls shoppers monthly, creating various consumer confidence indexes, including one for California.

The Trend

The overall statewide index was 109.8 in May — down from a revised 118.6 a month earlier and down from 118.2 a year ago. May saw a 7% one-month drop and a 7% drop over 12 months. Note that California’s confidence averaged 113 in the five years before the pandemic.

So 2022 has started with four confidence dips in five months, pushing this optimism yardstick to its lowest since September 2021. Rising mortgage rates have put a chill on the state’s red-hot housing market this year. And other rising prices pushed inflation to a four-decades high, another added concern.

Now let’s look at two measures inside the statewide index, and what they say about the mindset of California consumers …

Current conditions: Declining, with this index at 138.9 for the month — down from 151.9 a month earlier and above 124.4 a year earlier. This measure averaged 141 in 2015-19.

Shoppers’ outlook: Skittish, with this index at 90.4 for the month — down from 96.4 the previous month and down from 114.1 a year earlier. This measure averaged 94 in 2015-19.

Elsewhere

The Conference Board tracks the nation and seven other states — Texas, New York, Florida, Illinois, Pennsylvania, Ohio and Michigan. How did California compare?

Overall confidence: Three increases among the seven states in a month; just one up over the year. National? Down for the month; lower over 12 months.

Current conditions: Two increases in a month; three up over the year. National? Down for the month; higher over 12 months.

Outlook: Two increases in a month; one up over the year. National? Down for the month; lower over 12 months.

Arch-rivals? Texas’ overall confidence fell 8% in the month and decreased 16% in the year. Florida? 1% one-month gain but a 10% 12-month dip.

Big picture

What’s driving swings in optimism? The Conference Board also asks consumers nationwide about the job market and plans to make major purchases in the next six months …

More jobs? 18.5% up from 18.4% a month earlier and down from 27.7% a year earlier.

Buy a home? 5.9% down from 6.8% the previous month and up from 5.3% 12 months ago.

Buy a vehicle? 10.2% down from 11.2% a month earlier and up from 10% a year earlier.

Major appliance purchase? 45% down from 50% the previous month and up from 44% 12 months ago.

Then there’s the latest unnerving trend — inflation. Americans polled expect the cost of living to be 7.4% higher in a year, down from 7.5% a month earlier and up from 6.5% a year earlier.

And the stock market? 43% see it lower in 12 months, compared with 36% the previous month and up from 31% 12 months ago.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … FOUR BUBBLES!

Let’s remember it’s hard for the California economy to move forward with antsy shoppers. And there are serious worries — from political challenges, here and aboard, to record-high gasoline prices to businesses short on staffing and materials.

But comparatively speaking, note May’s drop in optimism: 7% lower in the Golden State over 12 months vs. down 11% across the U.S.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]

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