Consumer Confidence Unexpectedly Falls — and Falls Handily

The Conference Board has released its reading on consumer confidence for the month of October. Unfortunately, this is a bad drop that was unexpected for October and it is a fresh current-month reading for October and for the start of the fourth quarter. This is not released as quickly as the consumer sentiment from University of Michigan, but the “confidence” is a far wider pool of respondents than the “sentiment” survey.

Consumer confidence was measured at just 98.6 in October. The Bloomberg consensus estimate was 101.0, with an Econoday range of 98.6 to 106.5. We would point out that this looks like a wider range than we normally see, and it means that likely just one single economist called this very bad reading when the bulk of economists were looking for more positive ones.

The Present Situation Index fell to 120.6 in October from 127.9 in September. The Expectations Index was already under 100, and it fell to 83.9 in October from 87.2 in September. To make matters worse for a multi-month view, September’s reading was 104.1 on the initial report but was revised lower to 103.5.

Readings on consumer confidence have been mixed in recent months, but this reading rose handily over the past two months and was a new cycle high. That has now reversed and is not a good sign for the start of the fourth quarter of 2016. Perhaps the election is an excuse, but we did not see mention of the election in the statement. We have also seen continued improvements in the jobs components in the consumer confidence measures.

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There were mixed notes that all translate to “falling” from the Conference Board on the three major areas this month. They said that the consumers’ appraisal of current conditions softened (fell) in October. Consumers’ assessment of the labor market was also less positive (fell) than last month. Consumer optimism regarding the short-term outlook was somewhat less favorable (fell) in October, and the consumer outlook for the labor market was also less optimistic (fell) than in September. Individual readings in the October 2016 report were shown as follows:

• Those saying business conditions are “good” decreased moderately from 27.7 percent to 26.2 percent.
• Those saying business conditions are “bad” increased from 15.8 percent to 17.7 percent.
• Those stating jobs are “plentiful” decreased from 27.6 percent to 24.3 percent.
• Those claiming jobs are “hard to get” declined marginally from 22.3 percent to 22.1 percent.
• The percentage of consumers expecting business conditions to improve over the next six months decreased from 17.0 percent to 16.0 percent.
• Those expecting business conditions to worsen increased from 10.8 percent to 12.2 percent.
• The proportion expecting more jobs in the months ahead decreased from 15.7 percent to 13.1 percent.
• Those anticipating fewer jobs declined from 18.1 percent to 17.0 percent.
• The percentage of consumers expecting their incomes to increase was unchanged at 17.5 percent.
• The proportion expecting a decline decreased from 10.4 percent to 9.8 percent.

Lynn Franco, Director of Economic Indicators at The Conference Board, said about October:

Consumer confidence retreated in October, after back-to-back monthly gains. Consumers’ assessment of current business and employment conditions softened, while optimism regarding the short-term outlook retreated somewhat. However, consumers’ expectations regarding their income prospects in the coming months were relatively unchanged. Overall, sentiment is that the economy will continue to expand in the near-term, but at a moderate pace.

The monthly Consumer Confidence Survey is now about 12 days old for the most recent data. This survey had a cutoff date for the preliminary results of October 13, 2016.

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