Decline in Consumer Confidence, the Christmas Shopping Season, and Recession Outlook

By at 29 November, 2022, 2:21 pm

by Raymond J. Keating – 

According to the measure of consider confidence from The Conference Board, American consumers are a down-in-the-dumps bunch with the Christmas holiday shopping season getting into full swing.  The Conference Board reported that after recovering in August and September, the Consumer Confidence Index has now declined in both October and November.

The index came in at 100.2 in November (1985=100), compared to October (102.2). Both the Present Situation Index (covering views on current business and labor market conditions) and the Expectations Index (covering the short-term outlook on income, business, and labor market conditions) were down. The reading for November covers data through November 18.

As noted in the following chart, after nearly recovering from the pandemic hit, consumer confidence has been sliding since mid-2021.

Consumer Confidence Index: The Conference Board


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

“The Present Situation Index moderated further and continues to suggest the economy has lost momentum as the year winds down. Consumers’ expectations regarding the short-term outlook remained gloomy. Indeed, the Expectations Index is below a reading of 80, which suggests the likelihood of a recession remains elevated.”

Franco pointed to inflation:

“Inflation expectations increased to their highest level since July, with both gas and food prices as the main culprits. Intentions to purchase homes, automobiles, and big-ticket appliances all cooled. The combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023.”

Looking six months out, consumers’ views were particularly negative on the outlook for jobs and income.

These measures should concern businesses of all types and sizes, especially the small businesses that dominate the retail sector. Keep in mind that 91 percent of employer firms in retail trade have fewer than 20 employees. Toss in nonemployer firms, and that percentage jumps to 98 percent.

Two final points are worth noting.

First, consumer confidence and actual consumer behavior often stray from each other. So, it’s not unheard of that consumer confidence moves down, while consumers still wind up spending in what appears to be confident fasion. Also, of course, consumers can miss what lies ahead on the downside.

Second, as SBE Council has noted before, consumers are followers, taking their cues from what businesses are doing in terms of investing, expanding and hiring. That, in turn, speaks, in part, to what policymakers might be doing, that is, are they taxing and regulating in such ways so as to discourage or encourage entrepreneurship and investment, which turn out to be the real engines of economic growth?

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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