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Consumer confidence falls in November amid high inflation, layoffs

Christmas tree prices expected to rise
Consumers expected to pay more for Christmas trees this holiday season 01:51

American consumers are entering the holiday season feeling gloomier about the economy amid ongoing high inflation and layoffs in the tech sector, depressing U.S. consumer confidence for the second straight month in November. 

The Conference Board reported Tuesday that its consumer confidence index fell to 100.2 this month, down from 102.2 in October. November's figure is the lowest since July, and likely reflected an uptick in gas prices earlier this fall, said Lynn Franco, senior director of economic indicators at the Conference Board. 

Gas prices have since reversed and fell to $3.52 a gallon, on average, nationwide on Tuesday, according to AAA. That's down from $3.76 a month ago.

The data indicates Americans are taking a more gloomy view about the economy. Before the pandemic, the index regularly topped 120. With the cost of food, rent, clothing, and other essentials surging, inflation is near the worst in four decades, increasing 7.7% in October from a year earlier.

"Consumers' increased pessimism is consistent with our view that consumer spending and the broader economy are downshifting to a much slower growth path amid high inflation, rapidly rising interest rates and financial market volatility," noted Oxford Economics U.S. economist Gurleen Chadha in a Tuesday research note. 

"A tale of two incomes" 

Despite the negative outlook, however, most Americans — particularly those with higher incomes — are still spending, fueling a generally healthy start to the winter holiday shopping season last weekend.

The latest readings show a "tale of two incomes," according to Jeffrey Roach, Chief Economist for LPL Financial, in an email. 

"Inflation acutely impacts lower income households while upper income households feel less of the pain. Consumer confidence rose in November for those making $50,000 or more," he noted. 

The business research group's present situation index — which measures consumers' assessment of current business and labor market conditions — dropped slightly to 137.4 from 138.7 in October.

And the board's expectations index — a measure of consumers' six-month outlook for income, business and labor conditions -- declined to 75.4 from 77.9 last month.

Americans: Still shopping

Still, Americans opened their wallets on Black Friday and over the post-Thanksgiving weekend. Spending on Black Friday jumped 12% compared with a year ago, according to MasterCard Spending Pulse, though that figure is not adjusted for inflation.

And on so-called "Cyber Monday" earlier this week Americans boosted their online spending by 5.8% from a year earlier, Adobe Analytics said.

Consumers may not be able to sustain solid spending growth for much longer. A rising number of households are stepping up their use of credit cards — or "buy now, pay later" plans — to keep up with higher prices. And many are also dipping into savings, which rose sharply — on average — during the pandemic, as government stimulus checks and the postponement of spending on travel and entertainment boosted the average American's bank account.

Yet for lower-income households, those savings have largely been spent, though they may continue to fuel activity for higher-earning families.

Rising consumer spending, even after adjusting for inflation, is expected to buoy the economy in the final three months of 2022. Next year, however, many economists expect escalating interest rates, continuously high prices, and a cooling job market to weigh on the economy, possibly even tipping it into recession.

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