The 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.
Our experts were recently quoted on this topic in the following publications:
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis non-factual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.
Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.