The unexpected decline in the Conference Board's measure of consumer confidence to a three-month low of 97.6 in October, from 102.6, adds to the run of softer economic data. (The consensus forecast was 102.9.) Nevertheless, that still leaves confidence well above its long-run average of 90.8 and at a level that, historically, has been consistent with real consumption growth of about 3%. Put into that context, the decline is not a major concern. Moreover, with stock markets recovering more lost ground over the past week and gasoline prices down a little more, economists wouldn't be surprised to see confidence rebound before the end of this year.
Looking at the details, the decline in the headline index was driven by a sharp drop in the present situation index to 112.1, from 120.3. That would normally suggest there had been some weakening in labour market conditions. The survey also reveals that the net proportion of households saying that jobs were plentiful rather than hard to get deteriorated slightly to -3.6 in October, from -0.1. The net proportion expecting incomes to increase also fell back a little from 8.8, to 7.3.
"Accordingly, it appears that the slowdown in payroll employment growth is now showing up in the confidence surveys. At the margin that supports our view the Fed will wait until early next year before it begins to hike interest rates", says Capital Economics.
