Consumer Confidence Plummets to Nine-Month Low on Inflation Concerns
Higher prices for gas, food and other items weighed on the minds of consumers whose confidence in the economy plummeted to a nine-month low in November.
The Conference Board’s index fell to 109.5 from a revised 111.6 reading in October, according to the trade group’s report released on Tuesday.
“Expectations about short-term growth prospects ticked up, but job and income prospects ticked down,” said Lynn Franco, senior director of economic indicators at the Conference Board in a statement. “Concerns about rising prices – and, to a lesser degree, the Delta variant – were the primary drivers of the slight decline in confidence.”
Covid infections began rising in November in the U.S. as colder weather increased the number of people spending time indoors. The World Health Organization issued a warning last week about the Omicron variant.
“Consumers are getting rattled by rising prices and the Omicron variant is not going to help going forward,” said Joel Naroff, chief economist of Naroff Economics.
Several economic hindrances remain, decreasing consumer confidence, said Tim Quinlan, senior economist of Wells Fargo Securities.
“Inflation is as high as it has been in a generation, financial markets remain choppy and the usual stress that comes with the holiday season is complicated by an ever-changing virus and evolving guidance about how to best contain it,” Quinlan said in a report.
The Conference Board also measures the share of people expecting an increase in income in the next six months minus those anticipating a decrease. In November it declined to 5.9%, only the second dip since March.
The index “likely understates the true spending power of consumers since the survey only asks about ‘total family income’ in six months and not real, inflation-adjusted income,” Quinlan said. “While we have been warning of this potential threat to consumer spending for months, it has been on full display this holiday season as businesses have been passing along costs.”
Headwinds such as inflation and the pandemic will continue to drag on big-ticket consumer purchases, said Franco, the Conference Board’s senior director. The number of people who plan to buy a house, car, or major appliances over the next months declined, she said.
Even with the decline in November’s consumer confidence, the outlook remains higher than the average over the past decade, the report said.
“The Conference Board expects this to be a good holiday season for retailers and confidence levels suggest the economic expansion will continue into early 2022,” Franco said.