Measures of consumer confidence fell for the second straight month in October. According to Thomson Reuters and the University of Michigan, the Consumer Sentiment Index fell in October to 73.2 the lowest reading since December 2012. The Conference Board reported that the Consumer Confidence Index fell sharply by 9 points, 11.2%, on a month-over-month seasonally adjusted basis in October to 71.2.
Consumer confidence was shaken largely by the partial government shutdown and debt-ceiling crisis. Although a stopgap measure was signed, consumer confidence is likely to be volatile in the upcoming months as Congress revisits the budget and debt-ceiling.
In spite increasing consumer pessimism on business and labor market conditions, the housing market has been bolstered by low interest rates. However, the majority of consumers believe interest rates will increase. According to the Conference Board the share of respondents expecting higher interest rates in the next 12 months was 66.2% on a seasonally adjusted 3-month moving average basis.
Rising interest rates and policy uncertainty may also be negatively affecting homebuyer expectations. According to the Conference Board, the share of consumers planning to buy a home in the next 6 months was 5.8% on a seasonally adjusted 3-month moving average basis. Over this same period, the share of respondents planning to purchase a “lived-in” home was 3.4% while the share of respondents planning to purchase a new home was 0.8%. These measures were all down from the prior month.