American consumer confidence takes a hit in October
Money is exchanged at a food stand while workers wear face masks inside Grand Central Market on Wednesday, July 13, 2022, in Los Angeles. Falling gas prices gave Americans a slight break from the pain of high inflation last month, though the surge in overall prices slowed only modestly from the four-decade high it reached in June. And even as gas prices fall, inflation in services such as health care, rents and restaurant meals is accelerating. (AP Photo/Marcio Jose Sanchez)
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WASHINGTON (AP) — U.S. consumer confidence waned this month as concerns about inflation took hold after receding somewhat in recent months.
The Conference Board reported Tuesday that its consumer confidence index fell to 102.5 in October, from 107.8 in September. Consumers had grown more confident in the two previous months as rising gas prices moderated slightly even as the costs for other essential items remained elevated.
The business research group’s present situation index — which measures consumers’ assessment of current business and labor market conditions — fell sharply to 138.9 from 150.2 in September.
The board’s expectations index — a measure of consumers’ six-month outlook for income, business and labor conditions —- dipped to 78.1 from 79.5 last month.
Lynn Franco, the Conference Board’s senior director of economic indicators, said a reading below 80 for the expectations index is a level associated with recession, suggesting that risk appears to be gaining momentum.
The government reported recently that inflation in the United States accelerated in September, with the cost of housing and other necessities intensifying pressure on families, wiping out pay gains and all but ensuring that the Federal Reserve will keep raising interest rates aggressively.
Since March, the Fed has implemented its fastest pace of rate increases in decades to try to curb inflation that has punished households with soaring costs for food, gas, rent and other necessities.
In late September, the Fed boosted its benchmark short-term rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level since early 2008. It was the central bank’s third straight three-quarter point increase and most economists and analysts expect more increases before the year ends, including another potential 0.75 percentage point increase when the Fed meets next week.
Franco said that inflationary pressures will continue to be a drag on confidence and spending “which could result in a challenging holiday season for retailers.”
Earlier this month, the government reported that the pace of sales at U.S. retailers was unchanged in September from August. Rising rents and food prices chipped away at money Americans were willing to spend elsewhere.
Despite the downturn in overall confidence, Franco noted that consumers’ intentions to buy big-ticket items — major appliances and cars — rose slightly this month.
General Motors reported Tuesday that its third-quarter net profit rose 36.7% on strong sales.
Chief Financial Officer Paul Jacobson said the company isn’t seeing any sign that demand for new vehicles is slowing despite higher interest rates and inflation. “Pricing remains strong, demand remains strong for our products,” he told reporters early Tuesday.
The Conference Board also noted that intentions to buy homes also ticked up this month. That’s a somewhat surprising development as sales of existing homes have fallen for eight straight months, with long-term U.S. mortgage rates climbing near 7% last week.