Consumer Confidence Declines Again in October

Consumer confidence dipped slightly in October, marking the third month in a row of declines. However, there was a modest improvement in Americans’ perceptions of the current economic situation, despite increasing worries about what lies ahead, according to data from the Conference Board released on Tuesday.

The consumer confidence index for October stood at 94.6, which is a decrease of one point from the revised figure of 95.6 in September. It’s worth noting that this is the lowest the index has been since April 2025.

“Consumer confidence remained fairly stable in October, dropping just a bit from last month’s revised data,” commented Stephanie Guichard, a senior economist at the Conference Board. “Changes in various subcomponents were limited and mostly offset each other.”

Current Situation Shows Improvement, Future Expectations Weaken

The Current Conditions Index, which gauges consumers’ views on present business and labor market conditions, rose by 1.8 points to reach 129.3 in October. This increase reflects a better perspective on current business conditions and employability.

Interestingly, there was a notable uptick in how consumers rated job availability, marking the first improvement since December 2024. About 27.8% of consumers described jobs as “abundant,” a rise from 26.9% in September, while 20.2% felt the economy was “good,” slightly up from 19.9%.

On the flip side, the expectations index—a measure of consumers’ outlook for income, business conditions, and job availability—fell by 2.9 points to 71.5. This index has stayed below the 80 mark, which typically indicates a recession, since February 2025.

The contrasting trends of improving current conditions and declining future expectations highlight heightened uncertainty regarding the economy’s path. This could pressure the Federal Reserve to continue reducing interest rates in an effort to support the economy as a downturn looms.

Ongoing Labor Market Concerns

Even with better perceptions of employability now, consumers are feeling increasingly anxious about future job prospects. Only 15.8% expect employment to rise within six months, a slight drop from 16.6% in September. Meanwhile, 27.8% foresee job losses, up from 25.7%.

This cautious outlook comes on the heels of major layoffs announced by companies like Amazon and UPS and follows a weak jobs report from August, showing only a 22,000 people increase in payrolls. Interestingly, while the number of consumers believing a recession is very likely in the next year fell slightly in October, more individuals think the economy is already in a recession, a trend that has continued for three months.

In October, consumers’ assessments of their current and future financial situations improved after a drop in September. Still, their outlook on their current finances is below the average level for 2025.

Inflation and Political Issues

Consumers’ feedback was heavily marked by discussions about prices and inflation as key factors shaping their economic views. While concerns about tariffs diminished, mentions of U.S. politics surged significantly, with the ongoing government shutdown highlighted as a pressing issue.

Average inflation expectations for the next year climbed slightly to 5.9% in October from 5.8% in September. Additionally, 52.8% of consumers expect interest rates to increase, up from 51.1% the prior month.

Mixed Picture for Spending Plans

In October, intentions to buy cars went up, particularly for used vehicles. Plans for significant purchases remained largely steady, although there are signs of an uptick after some weakness early in the year.

Conversely, home purchase plans declined this month, breaking a six-month upward trend. After a rebound in September, consumer interest in purchasing services rose, particularly in areas like pet care, streaming services, and automotive services. Additionally, travel plans increased, likely tied to rising holiday intentions—this could indicate a recovery from earlier lows this year.

Anticipated Decline in Holiday Spending

Preliminary data suggests that consumer holiday spending is expected to be lower this season compared to last year. Specifically, shoppers anticipate a 3.9% decrease in gift spending and a 12% drop in non-gift expenditures, both on a nominal basis.

When asked what factors will guide their spending this upcoming holiday season, promotions and maximizing value were the most cited considerations. Some consumers indicated they might reduce purchases if the costs of imported goods rise due to tariffs. Although some began holiday shopping as early as the first quarter of 2025, most planned purchases are expected from October through the end of the year, with November likely bearing the largest share of spending.