Consumers plan to pull back on spending as confidence drops in November

WASHINGTON – The extended government shutdown weighed heavily on the minds of consumers in the month of November as the outlook on the economy took a dip, according to the latest report from the Conference Board.

The Consumer Confidence Index dropped 6.8 points to 88.7 for November, down from 95.5 the month prior. The Present Situation Index also fell, dipping 4.3 points to 126.9. Consumers’ outlook on the future took the biggest hit as the Expectations Index fell 8.6 points to 63.2. The Expectations Index has now sat below the recession-indicating 80-mark for 10 straight months.

“Consumer confidence tumbled in November to its second lowest level since April after moving sideways for several months,” said Dana M Peterson, chief economist at the Conference Board. “All five components of the overall index flagged or remained weak. The Present Situation Index dipped as consumers were less sanguine about current business and labor market conditions. The labor market differential — the share of consumers who say jobs are ‘plentiful’ minus the share saying ‘hard to get’ — dipped again in November after a brief respite in October from its year-to-date decline.

“All three components of the Expectations Index deteriorated in November. Consumers were notably more pessimistic about business conditions six months from now.”

Younger consumers – those under 35 years old – were the only age group to see confidence improve. Consumers age 35 and older saw confidence dip slightly, with those over 55 remaining the most downbeat.

Concerns of inflation, tariffs and the government shutdown were notable in respondents’ write-in responses. The average 12-month inflation expectations saw its median rate increase to 4.8 percent. This could tie into the perceived slash in spending over the next six months – consumers signaled reduced spending on nearly every category.

“Consumers’ write-in responses pertaining to factors affecting the economy continued to be led by references to prices and inflation, tariffs and trade, and politics, with increased mentions of the federal government shutdown,” Peterson said. “Mentions of the labor market eased somewhat but still stood out among all other frequent themes not already cited. The overall tone from November write-ins was slightly more negative than in October.”

Here are some other notes from this month’s report:

Present Situation

Consumers’ assessments of current business conditions worsened in November.

• 1 percent of consumers said business conditions were “good,” down from 20.7 percent in October.
• 9 percent said business conditions were “bad,” up from 14.5 percent.

On balance, consumers’ views of the labor market on net were a tad weaker in November.

• 6 percent of consumers said jobs were “plentiful,” down from 28.6 percent in October.
• However, 17.9 percent of consumers said jobs were “hard to get,” down from 18.3 percent.

Expectations Six Months Hence

Consumers were more pessimistic about future business conditions in November.

• 9 percent of consumers expected business conditions to improve, down from 18.9 percent in October.
• 7 percent expected business conditions to worsen, up from 22.2 percent.

Consumers were on net a bit more worried about the labor market outlook in November.

• 6 percent of consumers expected more jobs to be available, down from 15.8 percent in October.
• 5 percent anticipated fewer jobs, down from 28.8 percent.

Consumers’ outlook for their income prospects was less positive in November.

• 3 percent of consumers expected their incomes to increase, down from 18.2 percent in October.
• 13.8 percent expected their incomes to decrease, up from 11.8 percent.

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