The confidence that consumers have in the economy dropped in the beginning of October, but by the end of the month it seems to have plummeted.
The Index of Consumer Sentiment dropped to 87.2 in October, the same low recorded last September and the lowest level since October 2014, according to the Survey of Consumers conducted by the University of Michigan.
“The October decline was due to less favorable prospects for the national economy, with half of all consumers anticipating an economic downturn sometime in the next five years for the first time since October 2014,” Survey of Consumers Chief Economist Richard Curtin said.
An article by Jill Mislinski for Advisor Perspectives explains what this means historically:
The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.
The measure of Current Economic Conditions decreased 1% from last month from 104.2 to 103.2, and increased 0.9% from last year’s 102.3.
“Objectively, the probability of a downturn during the next five years is far from zero-this would be the longest expansion in 150 years if it lasted just over half of the five-year horizon,” Curtin said. “Nonetheless, the October rise may simply reflect a temporary bout of uncertainty caused by the election.”
The Index of Consumer Expectations decreased substantially at 7.1% from last month’s 82.7 and 6.5% from last year’s 82.1 to 76.8 in October.
Other sources are also reporting a drop in confidence. Consumers are less confident about the economy in October than last month, citing that, among other things, business conditions are bad, according to the Consumer Confidence Survey conducted by The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch.
“Prospects for renewed spending gains will depend on continued growth in jobs and wages as well as low inflation and interest rates,” Curtain said. “The small rise in interest rates now expected in December will have a minimal impact on spending.”
“Along with small increases in interest rates, consumers also anticipate a mild slowdown in job creation that is likely to prevent any further declines in the national unemployment rate,” he said. “To be sure, these changes are all anticipated to be small during the year ahead.”