The run of good economic news reported over the past few months, including an expectations-beating state revenue collections update, the caution light is flashing.
Consumer confidence dropped, according to the respected Conference Board survey.
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.
The Conference Board press release says,
“Consumer confidence declined slightly in October, following a sharp improvement in September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved while expectations declined, driven primarily by a softening in the short-term outlook for jobs. 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.”
An economist interviewed by the AP adds,
“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.”
The virus continues to earn the blame, as the Associated Press reports on renewed lockdown concerns.
The alarming surge in coronavirus cases in Europe and the U.S. is wiping out months of progress against the scourge on two continents, prompting new business restrictions, raising the threat of another round of large-scale lockdowns and sending a shudder through financial markets…
n the U.S., more than 71,000 people a day are testing positive on average, up from 51,000 two weeks ago. Cases are on the rise in all but two states, Hawaii and Delaware, and deaths are climbing in 39 states, with an average of 805 people dying in the U.S. per day, up from 714 two weeks ago.
Already economists are discounting the good news expected to be reported tomorrow about the economy’s strong third quarter performance.
Americans may feel whiplashed by a report Thursday on the economy’s growth this summer, when an explosive rebound followed an epic collapse.
The government will likely estimate that the economy grew faster on an annualized basis last quarter than in any such period since record-keeping began in 1947.
Just be forewarned: The sizzling pace won’t last.
It’s already in the past, some say.
“The strength of this figure is an optical illusion,” Nancy Vanden Houten, an economist at Oxford Economics, wrote in a research note. “Growth has since slowed, and we expect markedly weaker activity” in the October-December quarter and beyond.
The next state revenue forecast will be released in November.