Consumer confidence fell sharply in October, as Americans became more concerned concerning the present state of the economy and inflation barely two weeks ahead of the midterm elections.
The Conference Board’s consumer confidence index dropped to 102.8 from 107.8 in September, led by declines within the assessment of present conditions. That index fell to 138.9 from 150.2 a month earlier.
Views of the long run outlook also fell, but not as much, to 78.1 from 79.5 a month earlier.
“Consumer confidence retreated in October, after advancing in August and September,” said Lynn Franco, senior director of economic indicators on the business organization. “The current situation Index fell sharply, suggesting economic growth slowed to begin Q4. Consumers’ expectations regarding the short-term outlook remained dismal.”
“The expectations index continues to be lingering below a reading of 80 – a level related to recession – suggesting recession risks seem like rising,” Franco added.
The reading comes two days before the federal government reports on its first estimate of gross domestic product for the third quarter. Analysts expect that number to be positive, around 3%, following two quarterly contractions in the primary half, a typical – though not official – measure of a recession.
Political Cartoons on the Economy
It is also lower than two weeks before voters head to the polls for the critical midterms, with the control of Congress hanging within the balance. Most surveys show a really tight race as voters place inflation and the economy as their top concern after abortion and the long run of democracy gained ground this summer.
Sarcastically, there was some improvement within the inflation picture, but not enough to derail the narrative that prices for a lot of goods, notably energy and groceries, are reaching levels not seen in 40 years. That may prove toxic for the party in power, the Democrats, and President Joe Biden.
Two areas of the economy have proven particularly sensitive to inflation and the upper rates of interest that the Federal Reserve has turned to as a approach to tamp down demand and inflation. Mortgage rates have nearly doubled over the past yr and residential sales have slowed together with price appreciation. Gasoline prices, while below the $5 a gallon mark of the summer, are still elevated at around $3.49 a gallon.
“House prices flow through to shelter costs within the inflation indexes that the Fed targets with a lag of several quarters, so the declines in prices in mid-2022 will begin to slow inflation in 2023,” said Bill Adams, chief economist for Comerica Bank.
“It is a big reason why financial markets anticipate for short-term rates of interest to peak in early 2023, and for the Fed to begin pivoting to a less restrictive monetary policy by the second half of next yr,” Adams added.
Economists generally consider a recession is on the best way, most likely in 2023, consequently of the Fed’s actions. But there are differences in whether it is going to be mild or more long-lasting. Corporate earnings, meanwhile, are holding up for bellwether corporations like Bank of America and Coca-Cola. That has helped the markets to realize back a few of their losses from a couple of weeks ago.
