Consumer confidence fell in October as rising prices took a toll | So Good News
US consumer confidence fell in October to the lowest level since July as higher mortgage rates and rising inflation hurt housing costs.
The consumer confidence index fell to 102.5 from a revised 107.8 in September, according to information released Tuesday by the Assembly. Economists had expected a reading of 106.5, according to Refinitiv estimates. A reading above 100 indicates that consumers are optimistic about the economy. In February 2020, the consumer confidence index was 132.6.
Consumer spending, which drives the US economy, has remained strong since the start of the Covid-19 pandemic, with more purchases during the lockdown, followed by more spending on travel and eating out when food is out.
However, global imbalances in supply and demand have led to decades of high inflation in the United States, which the Federal Reserve is trying to bring down through a series of high rate hikes. This has led to higher rents, which increases overall costs for consumers, some of whom have started spending more.
Buyers’ short time The outlook remains “worrisome,” said Lynn Franco, head of the Financial Services Committee.
“Notably, inflation concerns – which have been slowing since July – have resurfaced, with gas and food prices acting as the main drivers,” Franco said in a statement. “Looking ahead, inflationary pressures will continue to weigh on consumer confidence and spending, which could lead to a challenging environment for retailers.”
Consumer expectations have weakened not only during the current economic situation but also what may come in the next few months.
“There’s a real sense that people can delay buying, but at the same time, there’s going to be some buying that can’t be delayed,” said Jason Reed, an economics professor at the University of Notre Dame. “If you think about your share of the wallet as a pie chart, people are going to fluctuate in what they’re spending. And some things are going to take a lot of money out of the wallet – like food and travel right now – so I can imagine that some expenses will go down.”
Consumers also said they feel less optimistic about the job market, with fewer respondents saying they believe jobs are “abundant.”
While the job market has remained strong throughout this year and 2021, there have been signs of cooling.
When it comes to big-ticket items, respondents said they plan to spend less on travel in the next six months, but they also said they plan to buy homes, appliances and cars.
“I was surprised that the intention to buy a home went up in the month with home prices rising about 7%,” Reed said. “Although buyers are anticipating another rise in interest rates and accelerating their home buying plans.”
Prices started to rise in early 2021 and have reached nearly 40-year highs in the past few months. In September, the Consumer Price Index – which measures changes in the prices of a basket of consumer goods – was 8.2% higher than in the previous 12 months.
The latest CPI report also shows that inflation has entered the services sector, where inflation is the most difficult.
Soaring inflation prompted the Federal Reserve to act aggressively, raising interest rates by 3.25 percent in six months. The central bank is expected to raise rates by another three quarters at its policy meeting next week.