Consumer Confidence in U.S. Declines by Most in Nine Months

(Bloomberg) --

U.S. consumer confidence posted the biggest drop since the start of the year as Americans’ expectations for the economy and the job market deteriorated, posing a risk to the household spending that is underpinning growth.

The Conference Board’s index decreased in September to a three-month low of 125.1 from a downwardly revised 134.2 a month earlier, according to data from the New York-based group. The median forecast in a Bloomberg survey of economists called for 133. Both the present situation and expectations gauges declined, with the latter dropping to the lowest level since January.

Key Insights

• U.S. stocks pared gains and Treasury yields fell after the report. Trade-war concerns and the economic impact are filtering through to Americans’ sentiment at the same time as businesses contend with fragile global growth and supply-chain challenges tied to uncertainty over tariffs.
• The overall measure remains elevated and within the range of the past year, suggesting consumers will continue to support the record-long U.S. expansion, though spending may moderate.
• The share of respondents who say jobs are currently plentiful dropped to a three-month low, while the share saying jobs are hard to get cooled.
• Before the latest number, the Conference Board’s measure had been at odds with the University of Michigan’s index of sentiment, which has deteriorated since July. Economists at Deutsche Bank Securities posit that the gap widens ahead of recessions because the former is more backward-looking with its focus on employment, while the Michigan gauge is slightly more forward-looking because of its emphasis on personal finances.

Official’s View

“The escalation in trade and tariff tensions in late August appears to have rattled consumers,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement. “However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing. While confidence could continue hovering around current levels for months to come, at some point this continued uncertainty will begin to diminish consumers’ confidence in the expansion.”

Economist’s View

“It could be that all the bad news around trade tensions that occurred in early August perhaps hadn’t fully filtered into the responses for the Conference Board number until this month,” said Stephen Stanley, chief economist, Amherst Pierpont Securities LLC. Still, “I think the consumer is hanging in their and is likely to continue to do so.”

Get More

• The index of the present situation declined to 169, a three-month low, while the expectations gauge slumped to 95.8 from 106.4, the largest monthly setback this year.
• The share of consumers who see business conditions getting worse six months from now climbed to the highest level since November 2013.
• The difference between the shares of those saying jobs are plentiful and hard to get, known as the labor differential, narrowed to 33.2 from 38.3, which was the widest since December 2000.
• The share of those respondents who say incomes will increase six months from now dropped to 19%, the lowest since January, from 24.7%, while the share of those expecting better business conditions fell to a six-month low.
• Buying plans for motor vehicles, homes and major appliances also declined in September.
• Confidence among those earning $125,000 or more a year suffered the largest one-month decline since April 2015.

--With assistance from Chris Middleton.

To contact the reporter on this story: William Edwards in Washington at wedwards29@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle

©2019 Bloomberg L.P.