Consumer confidence slides

Index takes hit in October after surge in virus cases

U.S. consumer confidence dipped slightly in October as a new wave of coronavirus cases appeared across the country.

The Conference Board reported Tuesday that its consumer confidence index fell to a reading of 100.9, from 101.8 in September, but still remains well below pre-pandemic levels. This month’s moderate decline follows a sharp rise in September.

Consumer spending accounts for 70% of economic activity in the U.S., so a decline in confidence gets a lot of attention from economists, especially as the U.S. heads into the crucial holiday shopping season.

Consumer confidence tumbled to 85.7 in April as large swaths of the country went into lockdown to check infections. It had consistently been well above 100 in the months before that, with the index hitting 132.6 in February before the severity of covid-19 infections became clear.

The part of the index that measures present conditions — which is based on consumers’ assessment of current business and labor market conditions — also increased from 98.9 to 104.6. However, consumers were less optimistic this month about the future, as the expectations index dipped to 98.4 in October from 102.9 last month.

The decline in expectations was mainly driven by a dimmer short-term outlook for jobs. The share of respondents who said that they expect fewer jobs in the next six months rose to 20.2% from 16.1%, the report showed.

“There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with covid-19 cases on the rise and unemployment still high,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement.

Respondents indicated they were less likely to make big purchases, including cars and appliances, in the coming months. The share planning to buy a home increased slightly to a three-month high of 6.6%.

Factors including the recent rise in coronavirus cases across the U.S., along with ongoing elevated job losses and uncertainty over next week’s presidential election may have played a part in consumers’ apprehension about the future.

“All of the negativity that accompanies presidential campaigns tends to weigh down on confidence in the month before an election,” said Stephen Stanley, an economist with Amherst Pierpont. “Though some may also blame the uptick in the virus.”

Economists project the expansion in the world’s largest economy to moderate after a projected record annualized increase in the third quarter.