U.S. Consumer Confidence Eases in October, Disappointing Expectations

• Confidence backpedals m/m but rises sharply from recession low.

• View of present conditions continues to strengthen; expectations deteriorate.

• Confidence again rises amongst all age brackets.

The Conference Board's consumer confidence survey indicated modest deterioration this month. The October index was 100.9 (1985=100), down 0.4% (-20.0% y/y) from September's little-revised 101.3. Expectations had been for an increase to 102.8 in the Action Economics Forecast Survey. Over the last 25 years, there has been a 58% correlation between the level of confidence and the y/y change in real consumer spending.

The index of expected conditions in six months fell 4.4% (+4.1% y/y) in October, the third decline in four months. A fairly steady 36.3% respondents expected improvement in business conditions in the next six months, but an increased 17.0% expected a worsening. A higher 33.2% expected a rise in employment while a raised 20.2% expected a decline. Income was expected to improve by an increased 18.4% of respondents, while a slightly higher 14.2% expected a decline.

The present situation index increased 5.8% in October to the highest level since March. The increase reflected a steady 17.5% of respondents who felt that business conditions were good and a lessened 33.9% who felt they were bad. The labor market was perceived as slightly better with the "labor market differential" (jobs plentiful minus jobs hard-to-get) improving to the highest level since March.

Expectations for the inflation rate in twelve months eased in October to 5.6%, remaining down from a 6.6% high in June. A slightly lessened 41.5% felt that interest rates would increase during the next twelve months while a lessened 20.8% felt they would decline. Plans to buy a house, new or existing, increased in this month to 6.6% of respondents, although this remained down from 7.7% in July. A lessened 9.7% of respondents planned to buy a car and a lower 44.2% planned to buy a major appliance within six months, roughly the lowest since January 2015.

By age group, the index of confidence amongst those under 35 improved 2.6% m/m (-22.1% y/y). Confidence of those aged 36-54 also rose 4.6% (-23.3% y/y) to the highest level since March. And for those over age 55, confidence rose 4.5% (-16.1% y/y), also to the highest level in six months.

The Consumer Confidence data are available in Haver's CBDB database. The total indexes appear in USECON, and expectations are in AS1REPNA.