Consumer confidence tumbles in October. Is the election to blame?
Consumer confidence fell sharply in October, a retreat that some economists attributed to uncertainty over the presidential election and slowing job growth.
A closely watched index of Americans’ outlook declined to 98.6 from a downwardly revised 103.5 in September, which was the highest since early 2015. Consumers' perceptions of both current conditions and the six-month outlook dimmed. Economists expected a more modest drop to 101.5, according to a Bloomberg survey.
Monthly job growth slowed to an average 161,000 in August and September after booming gains the previous two months and is averaging 178,000 this year, down from 229,000 in 2015. But with unemployment at 5%, employers are struggling to find workers, handing job candidates more leverage and nudging up wage increases.
And although pump prices have increased in recent months, regular unleaded is still a bargain at $2.22, roughly flat over the past month and the past year.
Some economists have said uncertainty tied to a divisive presidential election may be dinging consumer optimism.
“The drop in consumer confidence was broad-based and was driven by heightened levels of political uncertainty, rising gasoline prices, and a lackluster jobs report,” economist Chris Christopher of IHS Global insight wrote in a note to clients.
And this month, the University of Michigan chalked up a sharp drop in its sentiment index to the negative impact of uncertainty related to the presidential race, especially among lower-income consumers.
In explaining declining sales last week, Nigel Travis, CEO of Dunkin' Brands, which operates the Dunkin' Donuts and Baskin-Robbins ice cream chain, cited “the overwhelming dampening effect of the presidential election,” along with rising gas prices and changes in food stamp regulations.
“I think we’ll all be pleased when that’s past,” he told analysts.
Yet noting consumer confidence neared its post-recession high last month, economist Paul Ashworth of Capital Economics said it was unlikely the measure was hobbled by election concerns now that the "change" candidate, Republican Donald Trump, has lost more ground in polls to Democrat Hillary Clinton.
In October, 26.2% of those surveyed said business conditions are “good,” down from 27.7% the previous month. The share saying conditions are “bad” jumped to 17.7% from 15.8%. And the portion saying jobs are “plentiful” fell to 24.3% from 27.6%.
Americans were also less optimistic, with 13.1% expecting more jobs in the months ahead, down from 15.7%. The share expecting fewer jobs dropped to 17% from 18.1%. Yet 17.5% expect their incomes to increase, unchanged from a month ago.
Americans’ perceptions of the economy and labor market can be an indicator of their future spending, which comprises about 70% of economic activity.