Summary: US consumer confidence deteriorates slightly in October; University of Michigan index below consensus figure; views of present conditions, future conditions both deteriorate; decline across all demographics, political groups; Delta variant, supply-chain shortages, reduced labour force participation rates will continue to drag on spending; confidence in government policies declines “significantly” during past six months.
US consumer confidence started 2020 at an elevated level. However, surveys had begun to reflect a growing unease with the global spread of COVID-19 and its reach into the US by March of that year. After a plunge in April, household confidence recovered in a haphazard fashion, generally fluctuating at below-average levels until it recovered back to the long-term average in April 2021.
The latest survey conducted by the University of Michigan indicates confidence among US households deteriorated slightly on average in October. The University’s preliminary reading of its Index of Consumer Sentiment registered 71.4, below the generally expected figure of 73.5 and September’s final figure of 72.8. Consumers’ views of current conditions and expectations regarding future conditions both deteriorated in comparison to those held at the time of the September survey.
“The decline in confidence in economic policies was recorded across all age, income and education subgroups as well as among Democrats, Independents and Republicans,” said the University’s Surveys of Consumers chief economist, Richard Curtin.
US Treasury bond yields rose on the day. By the close of business, the 2-year Treasury yields had added 3bps to 0.39%, the 10-year yield had gained 5bps to 1.57% while the 30-year yield finished 2bps higher at 2.04%.
“The Delta variant, supply-chain shortages and reduced labour force participation rates will continue to dim the pace of consumer spending into 2022,” said Curtin. However, he also noted “confidence in government economic policies has significantly declined during the past six months”, a factor he said also “contributed to the slump in optimism.”
More-confident households are generally inclined to spend more and save less; some increase in household spending could be expected to follow. As private consumption expenditures account for a majority of GDP in advanced economies, a higher rate of household spending growth would flow through to higher GDP growth if other GDP components did not compensate.