Consumer confidence fell for the second month in a row as inflation and recession fears dampened the economic outlook.
The Conference Board’s confidence index dipped to 100.2 in November from 102.2 in October, significantly below the pre-pandemic level of 130.
Rising prices remained consumers’ top concern as expectations for inflation in the next 12 months increased by 0.3 percentage points on average, most likely because of elevated food and rent prices.
Falling confidence in the economy’s outlook is well aligned with our forecast of a substantial decline in spending next year, which would most likely trigger a recession.
For many consumers, a recession seems inevitable. The subindexes for buying plans for big-ticket items like houses, vehicles and major appliances all declined in November.
Despite a slight uptick in labor differential—which measures the difference between those who say that jobs are plentiful and those who say that jobs are hard to get—the labor market tightness from consumers’ point of view has peaked.
But the jobs index remained on par with 2019’s average, suggesting that it will take the labor market a couple of quarters more to signal a labor market recession.
Unlike the University of Michigan’s sentiment index, which is highly correlated with gasoline prices, the Conference Board’s confidence index is correlated with the labor market’s performance.
That means there are more reasons to expect the index to fall further as the labor market continues to loosen up and the risk of job losses rises.