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November 27, 2018 Blog 1 min read
Consumer confidence may have taken a step back in November, but they remain upbeat in their assessment of the current state of the economy.

November 2018 Consumer Confidence ChartThe Conference Board’s measure of consumer confidence fell in November to 135.7, a decline that was generally in line with expectations. Underlying that result was a bifurcated view on both current and future conditions. Consumers are increasingly upbeat about the current state of the economy, but are also maintaining a more skeptical stance on the outlook in the coming months.

The optimistic story is driven largely by the ongoing strength of the labor market. While layoffs have edged higher in the past few months, they remain at very low levels. That, coupled with exceptionally low unemployment and surprisingly resilient job creation, has provided a boost to the collective consumer mood.

Still, there’s a growing skepticism that business conditions may slow in the months ahead. Given the broader view that economic growth likely peaked earlier this year and is set to slow further in the coming quarters, that somewhat cautionary stance is probably warranted.

For some time, consumers were seemingly content to focus on the positive and largely shrug off the potential risks created by a range of geopolitical concerns, heightened trade tensions, and the impact of Fed tightening. That may be changing.

With little evidence that a breakthrough is near on a trade deal with China, there is a growing likelihood of the implementation of additional tariffs and further ratcheting up of tensions in the near term, which would negatively impact business conditions. Consumers would also see the impact in the prices of any number of imported goods.

Additionally, consumers are feeling the pinch of higher interest rates, most notably in the housing market, where affordability is diminished and activity has slowed over the past few quarters.

Despite those concerns, early indications are that stronger wage growth and the positive mood fueled strong consumer spending to kick off the holiday shopping season. Forecasts suggest that retailers may benefit from a sales increase of 5-6% over prior year, which would result in the best holiday season for the sector since 2011.

Despite a modest decline in confidence and the recognition that the pace of economic growth is slowing, consumers remain an upbeat lot. For now, they also appear to be comfortable opening their wallets and purses, letting their spending speak clearly on their behalf.

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