Invest2 publishers2 min readPublished
US consumer confidence sinks to 81.9, below its pandemic low
Conference Board's consumer confidence index fell 6.7 points to 81.9 in September, its lowest reading since April 2014. Economist James Knightley says consumers keep spending anyway, so the survey and his account of spending point in opposite directions.
The Investor · Invest desk
What happened
- The September reading sits below the lowest level the Conference Board index reached during the pandemic.
- The short-term expectations index fell 5.9 points to 63.6.
- SCMP's headline ties the slide to inflation and stagnant wages, while Knightley's note points to job and inflation fears.
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Why it matters
- decision Consumer-facing planners have to decide whether a mood survey is enough to cut revenue or inventory plans before any spending data confirms a pullback.
- exposure Current conditions lost more points than the outlook, so near-term sales are the first line at risk if the mood turns into behaviour.
- constraint Without the consensus figure, forecasters cannot tell how much of the 6.7-point drop their estimates had already assumed.
Measured in points, households marked down the present more than the future. The present-situation index lost 2 points more than the expectations index did, so the gap between the two components narrowed from 47.7 in August to 45.7 [4][3]. Measured in percent, the order reverses. Expectations fell about 8.5% from an implied August level of 69.5, and present conditions fell about 6.7% from an implied 117.2 [2][5][1][6].
That split matters for anyone using the survey to argue that households are retreating. The survey measures attitudes. The one claim about behaviour in either report comes from James Knightley [10], in a note published under the headline "Sentiment Slides Again, Yet U.S. Consumers Keep Spending" [7]. The note's subhead reads "Confidence falls further as job and inflation fears mount" [8].
One reading is that sentiment leads and spending follows, in which case a 6.7-point monthly drop [1] to a level below the pandemic trough [3] is an early warning for consumer-facing revenue. A second is Knightley's: sentiment and spending have come apart, and spending holds [7]. A third sits between them. Weakness in how people rate current conditions shows up first in hiring and pay, and that is where both publishers' headlines put the worry [6][8].
I think the second fits the evidence available, because the only statement about spending says it continues [7]. The counter-case is the component split. A 7.9-point fall in how people rate their present situation [4] is harder to dismiss as gloom about the future than an expectations-only drop would be, and an expectations index at 63.6 [5] leaves little cushion if the present-situation score keeps sliding. Spending data turning down in the months after this survey, in the same direction as the index, would prove this view wrong. Consumer-facing companies that hold their plans are accepting that a reading last seen in April 2014 [2] may turn out to have been the first sign.
What to watch
- Retail sales and personal spending releases after September: a turn lower in the same direction as the index would undercut Knightley's account.
- The Conference Board's October reading, and whether the present-situation score keeps falling faster in points than expectations.
- Jobs and wage data, since both headlines put the cause in employment, inflation and pay.