The Consumer Confidence Index from The Conference Board declined slightly in November but remains at historically moderate levels. The overall index fell 2.1 points or 1.9 percent to 109.5 (see first chart). From a year ago, the index is up 17.9 percent.
Both major components of the index fell for the month. The present-situation component decreased 3.0 points to 142.5 while the expectations component lost 1.4 points, taking it to 87.6 (see first chart). The total index and both components remain well above typical recession lows but also remain below record highs. The details of the report suggest that inflation fears and new Covid cases were the primary reasons for the decline.
According to the report, ““Expectations about short-term growth prospects ticked up, but job and income prospects ticked down. Concerns about rising prices—and, to a lesser degree, the Delta variant—were the primary drivers of the slight decline in confidence.” The report adds, “Meanwhile, the proportion of consumers planning to purchase homes, automobiles, and major appliances over the next six months decreased.”
Inflation expectations rose to 7.6 percent in November, up from 7.1 in October and 5.7 percent in November 2020; expectations were 4.4 percent in January 2020 (see second chart). While price increases have been seen across a variety of consumer goods and services since the onset of the pandemic, historically, gasoline prices and grocery prices have likely had a substantial influence on consumers’ inflation expectations (see second chart).
Among the other details in the report, consumers’ view of current business conditions weakened, the index for consumers saying business conditions are good fell 1.3 points while the index for consumers saying business conditions are bad rose 3.3 points, putting the net index down 4.6 points. On the positive side, consumers’ views of the labor market remained strong as the jobs hard to get index rose just 0.1 point while the jobs plentiful index rose 3.2 points, putting the net up 3.1 points (see third chart).
Among the details of the expectations views, there were decreases in the net index for expected income (-1.3 points) and expected employment conditions (-2.5 points) while the net index for expected business conditions gained 2.6 points. Indexes for plans for purchases of a home, car or vacation all fell in November.
The outlook for the economy is for continued expansion. However, ongoing shortages of materials, labor difficulties and logistical problems are sustaining upward pressure on prices and weighing on consumers’ attitudes. Furthermore, continued waves of new Covid cases also depress consumers’ views of the economy.