US consumer confidence worsened in October, reversing gains in September as concerns around food and petrol price inflation picked up again, in a potential warning to holiday retailers.
The consumer confidence index fell to 102.5 in October after reaching a five-month high of 107.8 in September, the Conference Board reported on Tuesday, missing economists’ estimates of 106.5. A reading of 100 refers to 1985 levels.
“Consumer confidence retreated in October, after advancing in August and September” said Lynn Franco, Conference Board senior director of economic indicators.
“Notably, concerns about inflation—which had been receding since July—picked up again, with both gas and food prices serving as the main drivers,” she continued.
Consumers sent mixed messages about their purchasing objectives as vacation plans cooled but intent to buy homes, automobile, and big-ticket appliances rose.
“Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers,” Franco said. Should demand fall, retailers could face margin pressures if they are forced to offer steep discounts for already-purchased inventories.
The index’s two constituent metrics, the present situation index and the expectations index, both worsened in October. The former, which tracks consumer perception of the current business and labour environment, “declined sharply” by 11.3 points to 138.9, while the latter, which assesses consumers’ short-term outlook for income, business, and labour conditions, remained “dismal” after decreasing to 78.1 from 79.5, Franco said.
A reading below 80 for the expectations index is associated with recession, “suggesting recession risks appear to be rising,” she added.
