Measures of consumer confidence continued to slide in November falling for the third straight month. The Conference Board reported that the Consumer Confidence Index fell by 2 points on a month-over-month seasonally adjusted basis in October to 70.4. Meanwhile, according to Thomson Reuters and the University of Michigan, the Consumer Sentiment Index fell by 1.2 points in November. Although the rate of decline slowed in November, the question is whether the readings show a softening economy or a short-term reaction to the government shut-down.
In addition to current economic conditions, the Conference Board surveys consumers’ future expectations. Consumers are asked whether they expect economic conditions in 6 months to improve, worsen, or stay the same. Although the overwhelming majority of consumers expect conditions to stay the same, more respondents expect business conditions to improve at 17.7% than worsen at 14.9%. Fewer respondents expect employment conditions to improve at 14.9% than worsen at 21.1%. The share of respondents expecting income to increase was nearly identical to the share expecting income to decrease at just above 15%.
According to the Conference Board, the share of consumers planning to buy a home in the next 6 months was 5.7% on a seasonally adjusted 3-month moving average basis. Over this same period, the share of respondents planning to purchase a “lived-in” home decreased slightly to 3.3%. The share of respondents planning to purchase a new home increased slightly to 0.9%.
The housing market has been bolstered by low interest rates and tight housing supply, however three straight months of declining consumer confidence are concerning. Consumer spending during the Holiday season should provide us with a better understanding of the nature of the recent decline in consumer confidence.