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U.S. Consumers Pessimistic in Oct. – But Still Spending

The U.S. Consumer Confidence Index fell for the third month in a row to 102.6 from Sept.’s 104.3. A top concern: The rising cost of goods and services.

BOSTON – The Conference Board Consumer Confidence Index declined a bit in October to 102.6, a drop from an upwardly revised 104.3 in September. It’s the third monthly drop in a row.

The Present Situation Index – consumers’ assessment of current business and labor market conditions – declined to 143.1 from 146.2.

The Expectations Index – consumers’ short-term outlook for income, business and labor market conditions – fell slightly to 75.6 in October from September’s 76.4. The Expectations index is still below 80 – a level that historically signals a recession within the next year – and consumer fears of an impending recession remain elevated.

“October’s retreat reflected pullbacks in both the Present Situation and Expectations Index,” says Dana Peterson, chief economist at The Conference Board. “Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular. Consumers also expressed concerns about the political situation and higher interest rates. Worries around war/conflicts also rose, amid the recent turmoil in the Middle East.”

Peterson says the decline was across the board and not specific to any demographic group.

Present situation

  • 19.1% of consumers said business conditions were “good,” down from 21.0% in September
  • 18.3% said conditions were “bad,” up from 15.9%
  • 39.4% said jobs were “plentiful,” down slightly from 39.7% in September
  • But13.1% of consumers said jobs were “hard to get,” down from 14.2%

Peterson says assessments “remain buoyant in the face of elevated inflation.”

“Fewer consumers said that business conditions were good, and more said they were bad,” she says. “Regarding the employment situation, slightly fewer consumers said that jobs were ‘plentiful’ compared to September, but the number saying jobs were ‘hard to get’ also declined.”

The Conference Board also asked respondents about their current financial situation, a measure not included in the Present Situation Index. “Those responding ‘good’ rose, and those citing ‘bad’ were little changed,” she says. “This suggests consumer finances remain buoyant in the face of elevated inflation.”

Expectations six months in the future

  • 16.5% of consumers expect business conditions to improve, up from 15.3% in September
  • But 20.2% expect conditions to worsen, up from 18.7%
  • 16.0% of expect more jobs to be available, down from 16.2% in September
  • 19.0% anticipate fewer jobs, up slightly from 18.9%
  • 15.6% of expect their incomes to increase, down from 17.9% in September
  • 13.0% expect incomes to decrease, down from 14.1%

“Expectations for the next six months stayed below the recession threshold of 80, reflecting a decline in confidence about future business conditions, job availability and incomes,” Peterson says. “The continued skepticism about the future is notable given U.S. consumers – at least through the third quarter of this year – continued to spend heavily on both goods and services.

“Expectations that interest rates will rise in the year ahead ticked up in October, and the outlook for stock prices weakened slightly. Furthermore, average 12-month inflation expectations increased in October to 5.9% after holding steady at 5.7% for the past three months.”

Will there be a recession?

“More than two-thirds of consumers said recession is ‘somewhat’ or ‘very likely’ in October,” says Peterson. “The fluctuating soundings likely reflect ongoing uncertainty given mixed buying plans. On a six-month moving average basis, plans to purchase autos and appliances rose while plans to buy homes – in line with rising interest rates – continued to trend downward.”

Toluna conducts the monthly Consumer Confidence Survey. The cutoff date for the preliminary results was October 24.

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