Consumer Confidence Dips as Hope for Future Dims

Consumers in the U.S. lost a bit of their confidence about the economic outlook in October even as their views of the current situation improved, according to survey data released Tuesday.

The Conference Board’s index of consumer confidence declined to a reading of 100.9 from a revised 101.3 in September. Last month, the gauge of consumers shot much higher than expected and economists had been expecting a slight uptick in October.

The decline was driven by a drop in consumers’ short-term outlook for income, business, and labor market conditions. The index for these dropped from 102.9 last month to 98.4 this month.

That could reflect rising pessimism about how the economy will fare after the election. As well, the surge in covid cases and fears of new lockdowns likely haunt consumer visions of the next six months.

“There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – roe from 98.9 to 104.6.

The Conference Board reports:

The percentage of consumers claiming business conditions are “good” was virtually unchanged, going from 17.6 percent to 17.5 percent, but those claiming business conditions are “bad” decreased from 37.0 percent to 33.9 percent. Consumers’ assessment of the labor market was more favorable. The percentage of consumers saying jobs are “plentiful” increased from 23.6 percent to 26.5 percent, while those claiming jobs are “hard to get” decreased slightly from 20.3 percent to 19.9 percent.

Consumer expectations for the labor market over the next six months drove down the outlook component.

Consumers, however, are now less optimistic about the short-term outlook than a month ago. The percentage of consumers expecting business conditions will improve over the next six months decreased slightly from 36.7 percent to 36.3 percent, while those expecting business conditions will worsen increased from 15.8 percent to 17.0 percent.

Consumers’ optimism regarding the job market was mixed. The proportion expecting more jobs in the months ahead increased slightly from 32.9 percent to 33.2 percent, but those anticipating fewer jobs also increased, from 16.1 percent to 20.2 percent. Regarding their short-term income prospects, the percentage of consumers expecting an increase improved from 17.3 percent to 18.4 percent, but the proportion expecting a decrease also increased, from 13.0 percent to 14.2 percent.

The divisions over the job market may reflect political outlooks, with those expecting their candidate to win having a sunnier view than those expecting a victory by their candidate’s rival.