Consumer Confidence Hits Four-Month Low Amid Persistent Inflation, Rising Interest Rates

By Lucia Mutikani

WASHINGTON (Reuters)—U.S. consumer confidence slipped to a four-month low in November, with households less keen to spend on big-ticket items over the next six months amid high inflation and rising borrowing costs, heightening the risks of a recession next year.

But the survey from the Conference Board on Tuesday also showed consumers remained upbeat about the labor market, which could limit some of the anticipated economic downturn. The labor market has remained resilient despite the Federal Reserve’s stiff interest rate increases, helping to keep consumer spending and the overall economy afloat.

“The consumer is still bummed out about the economic outlook coming into the home stretch for the year, but the major worry hasn’t yet shifted from inflation with the rising prices of goods sitting on store shelves to the labor market or whether or not you can find or keep your job,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

“That tectonic shift in consumer confidence from inflation worries to job concerns is coming though.”

The Conference Board’s consumer confidence index fell to 100.2, the lowest reading since July, from 102.2 in October. Economists polled by Reuters had forecast the index would come in at 100.0. Still, the index remains above its COVID-19 pandemic lows. It places more emphasis on the labor market, which remains tight.

The decline in confidence was concentrated in the 55-and-over age group as well as among households with annual incomes below $50,000. There were notable decreases in confidence in Pennsylvania, Ohio and Michigan, which offset increases in Texas, New York state, Florida and Illinois.

Consumers’ 12-month inflation expectations increased to a four-month high of 7.2% from 6.9% in October, which the survey blamed on rising gasoline and food prices.

The Fed has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range in what has become the fastest rate-hiking cycle since the 1980s.

The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, rose to 32.8 from 31.8 in October. This measure correlates to the unemployment rate from the Labor Department.

Though it has dropped from 44.7 last November, it remains quite high by historical standards.

“The Fed’s strategy of attempting to reduce the availability of job openings relative to the supply of labor to put downward pressure on inflation does

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