Consumer confidence continued to decline in November, despite expectations that perceptions might pick up again after the end of the budget impasse. Preliminary Consumer Sentiment Survey data from the University of Michigan and Thomson Reuters show a decline from 73.2 in October to 72.0 in November. As such, this was the fourth straight month of declining confidence, down from 85.1 in July. The July reading had been a six-year high, but the October reading brings attitudes back to levels not seen since December 2011.
The government shutdown was not helpful, with Americans frustrated with the political process. Yet, sentiment had been declining even before that. Indeed, views about current and future-looking economic conditions have both waned since July. The index of the current economic climate has fallen from 98.6 in July to 87.2 in November. Likewise, the expectations component decreased from 76.5 to 62.3 over the same time period.
There is not always a correlation between confidence and consumers’ willingness to make purchases. Nonetheless, it is notable that personal spending in the third quarter was essentially flat, corresponding to the falling sentiment readings discussed here. In general, though, consumer spending on goods have been a bright spot in the economy, adding nearly one percentage point to third quarter real GDP. With that in mind, economists watch confidence measures closely to gauge if changes in attitudes impacts overall consumers spending, which comprises roughly 70 percent of GDP.
The final data from this survey could reflect more optimism, of course. We will get these revisions on Wednesday, November 27, the day before Thanksgiving.
Chad Moutray is the chief economist, National Association of Manufacturers.