U.S. consumers are showing signs of stress as we head into the end-of-the-year holiday season, according to economic data released today.
The Conference Board said Tuesday its consumer confidence index dropped 6.8 points from October to November, registering 88.7, the lowest reading since April, when President Trump unveiled a comprehensive tariff plan that sent stock markets reeling.
Dana M. Peterson, the Conference Board’s chief economist, noted that U.S. consumers have become more pessimistic about economic conditions six months from now. The Conference Board’s expectations index dropped 8.6 points to 63.2, marking the tenth straight month below 80, a measure historically associated with recession. The outlook for the labor market remains “decidedly negative,” Peterson said, while expectations for income gains have shrunk dramatically.
An index measuring current economic conditions also fell, sliding 4.3 points to 126.9.
When asked what factors influenced their views, survey respondents cited prices and inflation, tariffs and trade, and politics, with some mentioning the federal government shutdown.
The Conference Board’s numbers are consistent with other measures of consumer attitudes. The University of Michigan’s index of consumer sentiment dropped nearly 5% in November and is down 29% from a year ago. Michigan’s measure of consumer expectations is down 34% from a year ago, while its index of current conditions is down 20%.
Retail sales sluggish: A separate report from the Commerce Department that had been delayed by the government shutdown showed that retail sales grew 0.2% in September on a monthly basis. The results show a drop from the growth recorded during the summer, when retail sales grew 1% in June and 0.6% in July and August.
Adjusting for inflation, retail sales actually fell in September. EY Chief Economist Gregory Daco noted that inflation has eaten up a big chunk of nominal growth. “While US #retail sales are up 16.1% since January 2022, inflation-adjusted retail sales are up... 1.1%,” Daco wrote Tuesday.
Rate cut odds jump: The downbeat economic news boosted hopes on Wall Street that the Federal Reserve will cut interest rates at its final meeting of the year next month. The odds of a rate cut jumped to 84% Tuesday, according to the CME FedWatch tool, which measures investor sentiment.
Last week, the odds of a rate hike in December dropped below 50%. “I’ve never seen that kind of volatility and expectations for a Fed cut in the span of a few days,” Ron Albahary, LNW’s chief investment officer, told CNBC. “The market is hyper-focused on this issue. I can’t predict the future, but it seems like the narrative is trending towards a Fed rate cut [on] Dec. 10, supportive of a Santa Claus rally.”
