American consumers are feeling more confident as the holiday shopping season gets underway, according to the latest data from the Conference Board. After three consecutive months of decline, consumer confidence saw an increase in November, with the index rising to 102 from October’s reading of 99.1. This surpassed analysts’ expectations, who had anticipated a reading of 101. The index measures both Americans’ assessment of current economic conditions and their expectations for the next six months. The boost in confidence was primarily driven by an improved outlook for the coming months.
The survey also revealed that Americans’ short-term expectations for income, business, and the job market improved, rising to 77.8 in November from October’s 72.7. However, this marked the third consecutive month with a reading below 80 for future expectations, historically an indicator of a recession within a year.
While expectations of a recession in the next 12 months reached the lowest level this year, with around two-thirds of respondents still anticipating a downturn before the end of 2024. The outlook for the overall economy remains cautious due to factors such as inflation, geopolitical conflicts, and higher interest rates.
Consumer spending plays a significant role in the US economy, accounting for approximately 70% of economic activity. Economists closely monitor consumer behavior to gauge the broader state of the economy. Despite rising borrowing costs, consumer spending increased by 0.4% in September. However, economists project a slowdown in spending during the last quarter of the year, as credit card debt and delinquencies rise, and average savings decrease.
In October, Americans reduced their retail spending, marking the end of six consecutive months of growth. The decline can partially be attributed to falling prices for gasoline and cars. Nevertheless, concerns about inflation and higher interest rates continue to influence consumers’ decisions.
The survey also indicated a slight decrease in consumers’ view of current conditions, which decreased from 138.6 in October to 138.2 this month. This suggests that while consumer confidence may have improved, there are still some reservations about the present economic landscape.
As the holiday season progresses, economists will closely monitor consumer behavior for indications of the overall economic trajectory. With the impact of inflation, global conflicts, and interest rates, it will be interesting to see how American consumers navigate their spending during this crucial time of year.
