Consumer confidence fell for the third month in a row, although at a smaller rate, from 104.3 in September to 102.6 in October, according to the latest data from The Conference Board.
“Consumer confidence fell again in October 2023, marking three consecutive months of decline,” said Dana Peterson, chief economist at The Conference Board. “October’s retreat reflected pullbacks in both the Present Situation and Expectations Index. 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. The decline in consumer confidence was evident across householders aged 35 and up, and not limited to any one income group.”
The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell from 146.2 to 143.1. For current business conditions, 19.1% of consumers said they were “good,” down from 21% last month. Additionally, 18.3% said business conditions were “bad,” up from 15.9%. For the labor market, 39.4% of consumers said jobs were “plentiful” (down from 39.7%), while 13.1% of consumers said jobs were “hard to get” (down from 14.2%).
“Assessments of the present situation were driven by less optimistic views on the state of business conditions, but consumers’ rating of current job availability held steady. Fewer consumers said that business conditions were good, and more said they were bad,” added Peterson. “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. However, when asked to assess their current family financial conditions (a measure not included in calculating the Present Situation Index), those responding ‘good’ rose, and those citing ‘bad’ were little changed. This suggests consumer finances remain buoyant in the face of elevated inflation.”
The Expectations Index—based on consumers’ short-term outlook for income, business and labor market conditions—fell from 76.4 to 75.6 (1985 = 100).
“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,” continued Peterson. “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.”
As for consumers’ short-term business conditions outlook, 16.5% expect business conditions to improve (up from 15.3%), and 20.2% expect conditions to worsen (up from 18.7%). For the labor market outlook, 16% of consumers expect more jobs to be available (down from 16.2%), and 19% anticipate fewer jobs (up from 18.9%). For short-term income prospects, 15.6% of consumers expect their incomes to increase (down from 17.9%), and 13% expect a decrease (down from 14.1%).
“More than two-thirds of consumers still said recession is ‘somewhat’ or ‘very likely’ in October,” concluded 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.”
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