Keating Analysis: Consumer Confidence Declines in November

By at 30 November, 2021, 1:16 pm

by Raymond J. Keating –

The latest read on consumer confidence from the Conference Board pointed to a slight decline in November.

The Consumer Confidence Index registered 109.5 in November (1985=100), down from 111.6 in October. It also should be noted that while October had seen an increase in confidence, the unmistakable trend after July has been downward.

Consumer confidence in November stood well above the level early this year, and what prevailed in 2020 after the pandemic hit, but short of pre-pandemic levels.

Source: The Conference Board

The Conference Board data show that consumers have relatively high confidence in the current situation (though down a bit in November), while concerned about some risks and uncertainties not too far down the road. It was noted:

“The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – fell to 142.5 from 145.5 last month. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – fell to 87.6 from 89.0.”

Source: The Conference Board

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, was quoted:

“Expectations about short-term growth prospects ticked up, but job and income prospects ticked down. Concerns about rising prices – and, to a lesser degree, the Delta variant – were the primary drivers of the slight decline in confidence. Meanwhile, the proportion of consumers planning to purchase homes, automobiles, and major appliances over the next six months decreased. 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. However, both confidence and spending will likely face headwinds from rising prices and a potential resurgence of COVID-19 in the coming months.”

Franco’s points on various concerns are correct, but I would add incomplete.

Politicians in Washington also are creating concerns and uncertainties with a policy emphasis on a vast expansion of government on seemingly all fronts, including higher taxes, more regulation, and significant increases in spending. Such an agenda seems designed for derailing or restraining our recovery from a pandemic economy.

Specifically, these and other policy items combine into a significant agenda that will restrain entrepreneurship and business investment. In turn, that will mean further dampening economic, income, and employment growth, and of course, consumer confidence. If politicians in Washington want to move consumer confidence in a more positive direction, they have to shift the direction of policy in a more positive direction for businesses.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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