US consumer confidence fell for the second straight month in November as inflation remains high, interest rates rise and the tech sector lays off workers.
The Conference Board reported on Tuesday that its consumer confidence index fell to 100.2 this month, down from 102.2 in October. November’s figure is the lowest since July and likely reflected an uptick in petrol prices earlier this fall, said Lynn Franco, senior director of economic indicators at the Conference Board.
Petrol prices have since fallen to a nationwide average of $3.52 a gallon ($0.93 a litre) on Tuesday, according to the American Automobile Association. That’s down from $3.76 per gallon ($0.99 per litre) a month ago.
The data indicate Americans are taking a more gloomy view on the economy. Before the pandemic, the index regularly topped 120. With the cost of food, rent, clothing and other essentials surging, inflation is close to its worst rate in four decades, increasing 7.7 percent in October from a year earlier.
Despite the negative outlook, however, most Americans, particularly those with higher incomes, are still spending, fuelling a generally healthy start to the end-of-the-year holiday shopping season.
The business research group’s present situation index, which measures consumer assessment of current business and labour market conditions, dropped slightly to 137.4 from 138.7 in October.
The Conference Board’s expectations index – a measure of consumers’ six-month outlook for income, business and labour conditions – declined to 75.4 from 77.9 last month.
Still, Americans opened their wallets on Black Friday last week and over the post-Thanksgiving weekend. Spending on Black Friday jumped 12 percent compared with a year ago, according to MasterCard Spending Pulse, although that figure is not adjusted for inflation.
And on so-called Cyber Monday this week, Americans boosted their online spending by 5.8 percent from a year earlier, Adobe Analytics said.
Consumers may not be able to sustain solid spending growth for much longer. A rising number of households are stepping up their use of credit cards and “buy now, pay later” plans to keep up with higher prices. And many are also dipping into savings, which rose sharply on average during the pandemic as government stimulus checks and the postponement of spending on travel and entertainment boosted the average American bank account.
Yet for lower-income households, those savings have largely been spent although they may continue to increase activity for higher-earning families.
Rising consumer spending, even after adjusting for inflation, is expected to buoy the economy in the final three months of 2022. Next year, however, many economists expect escalating interest rates, still-high prices and a cooling job market to weigh on the economy, possibly even tipping it into recession.
