American consumer sentiment took a significant hit in November, plummeting to its lowest point in seven months amid growing economic anxieties. The key confidence indicator dropped sharply, reflecting public concern in the aftermath of the recent government shutdown.
Sharp Decline in Consumer Confidence Index
The Conference Board reported on Tuesday that its consumer confidence index fell by 6.8 points to 88.7 in November, down from October's reading of 95.5. This marks the weakest performance since April, indicating a troubling shift in public sentiment after several months of relative stability.
Dana M Peterson, Chief Economist at The Conference Board, confirmed the downward trend, stating that consumer confidence had tumbled significantly after moving sideways for several months.
Mixed Signals in Employment and Inflation Data
The employment landscape showed some contradictory signals. While the percentage of consumers reporting that jobs are 'hard to get' slightly decreased to 17.9% from October's 18.3%, this figure remains substantially higher than September's 15.2%. Meanwhile, those describing jobs as 'plentiful' dropped to 27.6% in November from 28.6% the previous month.
Inflation concerns continued to weigh heavily on consumers' minds. The average 12-month inflation expectations remained elevated, with the median rate increasing to 4.8% in November.
Growing Pessimism About Future Economic Conditions
Americans expressed notably darker outlooks for business conditions, job prospects, and personal income over the next six months. The survey revealed that only 15.9% of consumers expected business conditions to improve, down significantly from 18.9% in October. Conversely, those anticipating worsening business conditions jumped to 27.7% from 22.2%.
The employment outlook similarly darkened, with just 14.6% expecting more jobs to be available compared to 15.8% in October. Income expectations also deteriorated, as only 15.3% anticipated higher earnings versus 18.2% the previous month.
Thomas Simons, chief US economist at investment bank Jefferies, provided context, noting that while consumer spending might not immediately collapse since spending has decoupled from confidence, risks to the downside are definitely increasing.
The survey also highlighted shifting perceptions about economic cycles. The share of consumers believing a recession is 'very likely' over the next 12 months actually fell in November, but the percentage thinking the economy was already in a recession rose for the fourth consecutive month.
According to Dana Peterson, consumers' written responses continued to be dominated by concerns about prices, inflation, tariffs, trade, and politics, with increased mentions of the federal government shutdown. She noted that the overall tone from November write-ins was slightly more negative than in October.
Ben Ayers, senior economist at Nationwide, told Reuters that many consumers may have reached their financial limit as rising prices and labor market concerns impact spending plans, at least for the near term.
