Background on The Conference Board and its Consumer Confidence Index
The Conference Board, a nonprofit organization dedicated to analyzing and disseminating economic research, publishes the Consumer Confidence Index (CCI). This index measures consumer confidence by surveying 5,000 households monthly on their perceptions of current business and employment conditions, as well as their expectations for future economic performance. The CCI is a key indicator of consumer sentiment, which can influence spending and investment decisions.
October’s CCI Drop: Lowest in Six Months
In October, the CCI fell to 94.6 points, its lowest level since April, according to The Conference Board’s report. This decline comes as consumers worry about short-term job availability, providing the Federal Reserve (Fed) with more reasons to consider another interest rate cut.
Economists’ Predictions vs. Actual CCI
Economists surveyed by Reuters had predicted the CCI would drop to 93.2 points. The actual decline from September’s revised figure of 95.6 points surpassed their expectations.
Divergent Confidence Levels Among Income Groups
The Conference Board’s survey revealed a “K-shaped” economic recovery, with lower confidence among consumers earning less than $75,000 annually but higher optimism among those earning over $200,000 per year. Economists argue that high-income households are keeping the economy afloat due to their robust spending.
Lower-income households struggle with making ends meet due to price increases, exacerbated by President Donald Trump’s broad tariffs on imports. The Conference Board noted that references to prices and inflation were the primary factor influencing consumers’ economic outlook this month, despite a decrease in mentions of tariffs.
“Trump 2.0” Economic Challenges
Christopher Rupkey, chief economist at FWDBONDS, stated: “Consumers are worn out and rightfully so; stock market records don’t help them find jobs or put food on the table, and with ongoing price increases for store-bought goods, many Americans are falling behind in the ‘Trump 2.0’ economy.”
Demographic Variations in Consumer Confidence
The confidence drop was more pronounced among consumers under 35 and to a lesser extent those over 55, while it improved among those aged 35 to 54. Independents reported increased confidence, but Democrats and Republicans expressed pessimism.
Political Concerns Dominate Consumer Comments
The survey showed a significant increase in references to national politics, with the ongoing government shutdown being frequently cited as a major concern. The shutdown, now nearing a record duration, shows no signs of resolution between Republicans and Democrats in Congress.
Cautious Outlook on Job Market
The proportion of consumers expecting job reductions in the next six months rose to 27.8%, the highest since April, compared to 25.7% in September. The proportion anticipating job increases during that period was the lowest since April, though opinions on current labor market conditions improved.
The “labor market differential” in the survey, derived from respondents’ views on job abundance or scarcity, increased to 9.4% from 8.7% the previous month.
Key Questions and Answers
- What is the Consumer Confidence Index (CCI)? The CCI measures consumer confidence by surveying 5,000 households monthly on their perceptions of current business and employment conditions, as well as their expectations for future economic performance.
- Who publishes the CCI? The Conference Board, a nonprofit organization dedicated to analyzing and disseminating economic research.
- What caused the recent drop in CCI? Concerns about short-term job availability, influencing the Federal Reserve to consider another interest rate cut.
- How do different income groups view the economy? High-income households are more optimistic, while lower-income households express pessimism due to price increases and tariffs.
- What are the demographic variations in consumer confidence? Confidence dropped more among younger consumers and to a lesser extent older consumers, while it improved among middle-aged consumers. Independents reported increased confidence, but Democrats and Republicans expressed pessimism.
- What are the main concerns in consumers’ comments? Political concerns, particularly the ongoing government shutdown, dominate consumer comments.
- What is the outlook on the job market? While consumers expect job reductions in the next six months, opinions on current labor market conditions have improved.
