Confidence in the U.S. economy slid further in October as consumers fretted about sticky inflation, Washington’s continued dysfunction, a possible U.S. recession and war in Israel, according to a report released Tuesday.
The Conference Board’s Consumer Confidence Index fell to 102.6 from an upwardly revised 104.3 in September. The widely followed indicator still came in higher than expectations of 100, according to a consensus estimate from Dow Jones.
The board’s expectations index, which measures consumers’ six-month outlook for income, business and labor conditions, continues to signal a recession within the next year: it fell to 75.6 in October from 76.4 in September. Any reading below 80 has historically been followed by a recession within the next year.
Many economists, however, have said recession risks have declined substantially this year and economy growth remains strong, with the U.S. gross domestic product growing 4.9% in the third quarter. Still, many economists have also said this blockbuster growth won’t last through the fourth quarter.
“Consumer fears of an impending recession remain elevated, consistent with the short and shallow economic contraction we anticipate for the first half of 2024,” the Conference Board report said.
The board’s present situation index, which is based on consumers’ assessment of current business and labor market conditions, fell to 143.1 from 146.2 last month.
“Consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular,” said Dana Peterson, chief economist at The Conference Board. “Consumers also expressed concerns about the political situation and higher interest rates. Worries around war/conflicts also rose, amid the recent turmoil in the Middle East.”
Inflation has declined precipitously since hitting a peak of over 9% in June 2022, but it’s still 3.7% as measured by the consumer price index. That’s well-above the Federal Reserve’s target of 2%.
The Fed is meeting this week to decide on interest rates. It is widely expected to hold its key rate at 5.25% to 5.5%, a 22-year high. The central bank will announce its decision at 2 p.m. on Wednesday.
