Consumer confidence remained weak in November

Final results for November from the University of Michigan consumer surveys show that overall consumer confidence has eased for the month, holding near historically low levels (see chart one). Composite consumer confidence fell to 56.8 in November, down from 59.9 in October. The index hit a record low of 50.0 in June, down from 101.0 in February 2020 at the start of the lockdown recession. The decline in November was 3.1 points, or 5.2 percent. The Composite Index remains consistent with previous recessionary levels.

The current economic conditions index fell to 58.8 from 65.6 in October (see chart one). This represents a decrease of 6.8 points, or 10.4 percent, for the month. This component is only five points higher than the June low of 53.8 and remains consistent with previous recessions.

The second component — consumer expectations, one of AIER’s leading indicators — fell 0.6 points, or 1.1 percent, for the month, to 55.6. This index of 8.3 points is above the July 2022 low of 47.3 and remains consistent with previous recessionary levels (see chart one). According to the report, “Consumer confidence fell 5% below October, recouping about a third of the gains recorded since the historic low in June.” The report adds: “Besides the continuing impact of inflation, consumer attitudes have also been affected by rising borrowing costs, declining asset values, and poor labor market prospects. Terms of purchase of durable goods, which improved significantly last month, fell sharply in November, falling by 19%. to their September level on the basis of higher interest rates and continued price increases.The report further notes that “long-term business conditions fell by a more modest 6%, while short-term business conditions and personal finances were essentially unchanged.”

One-year inflation expectations eased in November, falling to 4.9 percent. The result is still below consecutive readings of 5.4 percent in March and April but above the reading of 4.7 percent in September (see chart two).

Five-year inflation expectations rose, reaching 3.0 percent in November. This result is in the 25-year range of 2.2 percent to 3.5 percent (see chart two). The report states that “Long-term inflation expectations, currently at 3.0%, have remained in the narrow (albeit high) range of 2.9-3.1% for 15 of the past 16 months.” Furthermore, “uncertainty about these projections remained at a high level, which indicates that the overall stability of these projections may not necessarily continue.”

Pessimistic consumer attitudes reflect a large list of concerns, including inflation, rising interest rates, falling asset prices, and growing labor market pessimism. Overall, economic risks remain elevated due to the impact of inflation, an intense Fed tightening cycle, and the ongoing fallout from Russia’s invasion of Ukraine. The economic outlook remains highly uncertain. Caution is required.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after more than 25 years in financial and economic markets research on Wall Street. Bob was previously Head of Global Equity Strategy for Brown Brothers Harriman, where he developed an equity investment strategy that combined top-down macro analysis with bullish fundamentals.

Prior to BBH, Bob was chief equity analyst at State Street Global Markets, chief economic analyst at Prudential Equity Group and chief economist and financial markets analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business Administration from Lehigh University.

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