Consumer Confidence Drops On Inflation, COVID

Consumer confidence deteriorated in November, data out Tuesday showed.

It’s hardly surprising that Americans are feeling incrementally less comfortable about the outlook.

Inflation is running the hottest in three decades and, at least according to recent color accompanying the University of Michigan’s sentiment gauge, voters aren’t convinced policymakers have a credible plan to tackle rising prices.

The Conference Board’s index printed 109.5 for November, below estimates and down from a revised 111.6 in October (figure below).

The range, from nearly five-dozen economists, was 105 to 115.5.

Both the present situation and expectations gauges dropped, albeit not dramatically.

“Expectations about short-term growth prospects ticked up, but job and income prospects ticked down,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said, in a press release. Franco cited rising prices as the proximate cause of consumer angst.

Consumers’ views on the business environment were marginally worse, while their perception of the labor market improved. The labor differential widened to 46.9 (from 43.8). That’s a record and may bode well for the jobs report later this week.

Franco said the Delta variant weighed on confidence at the margins this month, but “to a lesser degree” than inflation. Obviously, we’ll need to wait for December’s print to determine the psychological impact of Omicron.

The stocks are still fine (figure above) — for now, anyway.

If you ask the Conference Board, this should be “a good holiday season for retailers.” Consumers are ostensibly still sitting on plenty of cash and we’re told household balance sheets are healthy. Recent data showed retail sales and personal consumption remained robust last month.

Although Franco said Tuesday the expansion should “continue into early 2022,” there was a caveat. “Both confidence and spending will likely face headwinds from rising prices and a potential resurgence of COVID-19 in the coming months,” the report said.

You can probably drop the “potential” part.