U.S. Consumers: Not Happy

By at 25 October, 2022, 8:20 pm


by Raymond J. Keating –

The latest take on consumer confidence from the U.S. Conference Board shows that American consumers generally are not a happy bunch. That should surprise no one, as they seem to have little to be overjoyed about now or in the near term.

The Consumer Confidence Index in October retreated to 102.5 (1985=100) from 107.8 in September.

The Conference Board further reported:

“The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – declined sharply to 138.9 from 150.2 last month. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – declined to 78.1 from 79.5.”

What does this mean? A dismal outlook.

According to Lynn Franco, Senior Director of Economic Indicators at The Conference Board, “Consumers’ expectations regarding the short-term outlook remained dismal. The Expectations Index is still lingering below a reading of 80 – a level associated with recession – suggesting recession risks appear to be rising.”

Franco added, “Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers. And, given inventories are already in place, if demand falls short, it may result in steep discounting which would reduce retailers’ profit margins.”

One always needs to be careful about surveys of consumers, as at times they can diverge from what consumers are actually doing. However, in this case, these sobering views line up with what’s been going on with retail sales, for example. (See SBE Council’s latest look at retail sales.)

Policy fuels negative headwinds.

Consumer views also line up with harsh public policy realities at the federal level whereby the Federal Reserve is purposefully working to undermine economic growth, and the Biden administration and Congress are de facto doing the same with an agenda focused on higher taxes, hyper-regulation, indifference (at best) or protectionist on advancing free trade, and expanding politically-driven government spending.

Yes, it’s easy to understand why consumers are less than pleased.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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