American consumer confidence tumbled this month to a four-month low, amid a gloomy economic outlook, according to The Conference Board.
The U.S. economy has been facing persistently high inflation, energy shortages, and rising interest rates since last year, raising the risk of a severe recession in 2023.
The Conference Board’s Consumer Confidence Index fell to 100.2 in November from a revised 102.2 reading in October, according to the latest data released on Nov. 29.
Bloomberg’s median forecast survey of economists had expected a drop to 100.
The board’s expectations index, reflecting American consumers’ six-month outlook, dropped to 75.4 in November from 77.9.
The gauge of current conditions this month fell to 137.4 from 138.7 in October, the lowest it has been since April 2021, suggesting the economy has lost momentum as the year winds down.
“Consumer confidence declined again in November, most likely prompted by the recent rise in gas prices,” said Lynn Franco, senior director of economic indicators at The Conference Board.
“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.”
US Consumer Confidence Begins to Fear Long-Term Economic Challenges
There appeared to be a sizable decrease in confidence in states such as Pennsylvania, Ohio, and Michigan, while Texas, New York, Florida, and Illinois saw a boost.The highest pace of annual inflation in 41 years has pushed many lower- and middle-income Americans to rely on credit cards and personal savings to pay their bills.
However, The Conference Board’s survey showed that 45.8 percent of Americans consumers still remained positive about the labor market, which may stall an economic downturn.
Nonetheless, an increasing number expect that fewer jobs will be available in the next six months, to 21.4 percent, which is a sign of a decline in outlook.
The Federal Reserve’s aggressive policy to increase interest rates has yet to cause much damage to the strong U.S. labor market, which still remains tight, keeping consumer spending and the overall economy afloat for now.
Since the start of the year, the Fed has raised its policy rate to a range of 3.75—4.00 percent from near zero, for the fastest rate-hiking cycle since the 1980s.
“Black Friday Has Gotten Out Of Control,” said commentator Steve Inman in a sarcastic tweet, which showed short lines of shoppers, in what should have been one of the hottest weekends of the year for retailers.
Retailers across the country were offering generous discounts to clear out a glut of inventory for the holiday season, but shoppers appear to be deterred as prices remain high.Consumers Spend Less on Major Purchases
Expected median inflation over the next 12 months rose to a four-month high of 7.2 percent, from 6.9 percent in October, which The Conference Board blames on a jump in gas and food prices.Many consumers are spending more on necessities like food, gas, and rent this month instead of on discretionary purchases.
Purchases of housing, automobile, and large appliances also fell in November, after manufacturing and housing costs began to increase.
Months of rising mortgage rates and home prices have significantly reduced affordability, with many potential buyers being forced out of the housing market.
Although home prices started to ease in recent months, after record highs set during the pandemic-era housing boom, they remain elevated due to continued inventory shortages.
Meanwhile, the Personal Consumption Expenditures Price Index for October, which the Fed uses as a gauge on inflation and real consumer spending data, will be released on Dec. 1.
