November 27, 2019
This Thanksgiving, we’re thankful for solid consumer confidence, even though it has wavered in recent months.
Consumer confidence fell for a fourth straight month in November, according to preliminary Conference Board data. Even though the Conference Board’s Consumer Confidence Index has dropped from its economic cycle peak, consumer sentiment is still historically elevated, as shown in the LPL Chart of the Day.
We’ve been pleasantly surprised by the U.S. consumer’s resilience over the past year as other parts of the domestic economy have weakened amid global headwinds. Strong consumer spending has helped the economy grow at a 2% average rate over the past two quarters, despite drags on growth from business spending, inventories, and trade.
“Consumer sentiment has been largely immune from global headwinds,” said LPL Financial Senior Market Strategist Ryan Detrick. “We expect consumer spending to power economic growth through next year, so we’d like to see consumer confidence pick up more with signs of trade progress.”
Consumers have several reasons to be optimistic. Employment is the primary driver of consumer health, and the U.S. labor market has been resilient. Wages are growing at a healthy rate, and consumers are reaping the benefits of tax cuts and record-high stock prices. As long as the job market stays solid and inflation remains in check, we feel good about consumers’ prospects.
Still, there are growing signs of concern. While survey respondents have remained optimistic about present conditions, their outlook on future conditions has soured, according to the Conference Board. If consumers are feeling less confident about the future, they may be less inclined to spend and invest. That loss of confidence in the outlook could lead to economic weakness over time if consumers step back.
Overall, we would need to see more significant deterioration in consumer confidence before we would start to worry about the economic outlook.
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