Consumer confidence rose in November, ending a three-month trend of declines, a positive development for the economy.
The Conference Board’s consumer confidence index rose to 102 in November, up from 99.1 the month before, the group announced on Tuesday. The expectations index, which tracks consumers’ short-term outlook for income, business, and labor market conditions, increased to 77.8 this month from 72.7 in October.
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While the expectations index rose, the Conference Board noted in a news release that the index remains below 80, which is a level that typically signals a recession within the coming year. About two-thirds of consumers in November said they perceive a recession to be “somewhat” or “very likely” to occur over the next year.
Still, the rise in consumer confidence is a welcome development as the Federal Reserve keeps interest rates at the highest level they have been at in years.
“General improvements were seen across the spectrum of income groups surveyed in November,” said Dana Peterson, chief economist at the Conference Board. “Nonetheless, write-in responses revealed consumers remain preoccupied with rising prices in general, followed by war/conflicts and higher interest rates.”
While inflation has rankled consumers, it has trended down over the past year, and the consumer price index is now running at 3.2%, still above the Fed’s 2% goal but far lower than the highs notched in 2022.
The labor market is also chugging right along. The economy added 150,000 jobs in October, fewer than most economists had projected, although job growth has not turned negative.
Gross domestic product growth, a relative measure of the country’s overall economy, has also remained very strong.
“Still-positive job growth, cooling inflation, and rising incomes should be positive for households,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “However, sentiment readings remain well below pre-pandemic levels and bear watching for signals about more caution on the part of consumers going forward.”
Despite the November uptick in consumer confidence, the University of Michigan Consumer Sentiment Index plunged to 61.3 in November, down from nearly 64 in October, according to numbers released last week.
Still, November’s sentiment index was a bit better than consensus estimates among economists for just over 60.
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“While this marks the fourth consecutive month of declines, November’s reading reflects a balance of factors, some of which improved while others worsened,” survey director Joanne Hsu said. “More favorable current assessments and expectations of personal finances were offset by a notable deterioration in expected business conditions.”
The Fed has been raising rates since March 2022, although it appears on track to have pushed interest rates as high as they will go during this tightening cycle. At 5.25% to 5.50%, Fed officials have hinted that they are at their terminal rate, although Fed Chairman Jerome Powell has left the door open to more hikes should inflation prove stickier than expected.