The Conference Board’s measure of consumer confidence slipped for the fourth consecutive month, dipping to 125.5 in November. That result fell short of expectations of 127.0, while also declining modestly from the revised October reading of 126.1. The current reading is about 10 points off this year’s high reached in July, but still reflects a relatively optimistic stance from a historical perspective.
The current situation index declined by nearly 7 points, while the expectations index edged about 3 points higher. For some time, consumers have been more positive on current conditions, but have had a more wary eye on the future. That appears to be changing, at least at the margins.
While a sustained decline in consumer attitudes shouldn’t be overlooked, it’s significance should also not be overplayed. Household finances remain on a relatively solid footing, supported by robust labor market conditions, manageable debt payments, and strong savings. Wage growth, while lower than anticipated given the exceptionally low unemployment rate, are still supportive, particularly with inflation so low.
Uncertainty on a variety of fronts can and will weigh on the collective consumer psyche, but can also change quickly. Certainly, the Fed’s actions to ease interest rates provided a direct stimulative boost to the economy. They also sent a clear message to consumers that the Fed was paying attention to the various risks to the expansion and would act decisively to address them. Recession fears have eased as a result.
Despite its modest pullback, measures of confidence remain quite high. That’s a promising sign for retailers heading into the critical holiday shopping season. Moreover, for an economy that remains almost completely dependent upon the consumer sector to act as the engine of growth until trade clouds clear and business sentiment improves, an optimistic consumer base should continue to spend. The importance of that can’t be overstated today.
The economy appears well positioned to continue to grow well into 2020, so long as consumers keep their pocketbooks open. For now, that appears likely.
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.