Consumers in the United States are feeling less confident about the economy and the short-term outlook for their employment and income prospects, the Conference Board said on Tuesday.
The Conference Board’s Consumer Confidence Index fell 2.1 points to 109.5 in November, after posting an increase in October.
The Present Situations Index – which gauges how consumers feel about current business and job market conditions – fell to 142.5 in November from 145.5 the previous month.
More importantly, the Expectations Index, which assesses how consumers feel about the short-term outlook for income, business and employment conditions fell to 87.6 from 89.
“Concerns about rising prices – and, to a lesser degree, the Delta variant – were the primary drivers of the slight decline in confidence,” said Lynn Franco, senior director of economic indicators at the Conference Board.
Consumer spending drives roughly two-thirds of US economic growth. So when consumers start feeling less optimistic about the economy’s prospects, it could signal that activity is poised to downshift.
US households have been grappling with soaring prices this year, as businesses – faced with rising costs from labour and raw material shortages – pass at least a portion of those increases on to consumers.
In October, US consumer prices year over year surged at their fastest pace in three decades.
Consumers often react to rising prices by swapping out more expensive brands for less pricey ones or simply going without goods and services they can put off buying until a later date, when sticker shock may have eased.
The Conference Board said on Tuesday that the proportion of consumers planning to buy homes, automobiles and major appliances over the next six months decreased.
But it still expects the holiday shopping season to be a good one for retailers.
“Confidence levels suggest the economic expansion will continue into early 2022,” said Franco. “However, both confidence and spending will likely face headwinds from rising prices and a potential resurgence of COVID-19 in the coming months.”
The Conference Board completed its survey on November 19 – before news of the Omicron variant of the coronavirus hit the headlines – meaning the latest pandemic twist had yet to influence consumer attitudes.
But some analysts see the Omicron variant having only a negligible effect on the US economy.
“We currently expect the Omicron variant will have only a moderate negative impact on growth,” said economists at Oxford Economics. “We still anticipate real GDP growth of 7.9% in Q4 and real consumer spending growth of 6.5%.”