November 28 , 2023

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The Conference Board reported that consumer confidence rose 2.9 points in November to 102.0 after  having fallen 5.2 points in October.  Confidence has been bumping along at roughly this same level for a year.

Chief Economist at the Conference Board, Dana Peterson, said  “Consumer confidence increased in November, following three consecutive months of decline.  This improvement reflected a recovery in the Expectations Index, while the Present Situation Index was largely unchanged. November’s increase in consumer confidence was concentrated primarily among householders aged 55 and up; by contrast, confidence among householders aged 35-54 declined slightly. General improvements were seen across the spectrum of income groups surveyed in November. Nonetheless, write-in responses revealed consumers remain preoccupied with rising prices in general, followed by war/conflicts and higher interest rates.”

We envision moderate economic growth in the months ahead.   The economy keeps cranking out new jobs which are showing few signs of slowing down very much   With the funds rate at 5.5% and the core CPI at 4.0% the real funds rate is +1.4% which may be high enough to further slow the pace of economic facticity.  The bottom line is that the economy is likely to grow at a 1.5% pace in the fourth quarter. . Wages are growing steadily which is boosting consumer income.   The Fed has boosted the funds rate from 0.0% to 5.5%, Given the magnitude of the declines in confidence one might have expected a sharp pullback in consumer spending.  But that has not happened.  Instead, real consumer spending has risen 2.4% in the past year.  While they say they are worried, consumers still have a job with little chance of losing it any time soon, and their balance sheets are the best they have been since the 1980’s so they keep spending.

Confidence data reported by the Conference Board are roughly matched by the University of Michigan’s series on consumer sentiment.   As shown in the chart below, trends in the two series are identical but there can be month-to-month deviations.

Stephen Slifer

NumberNomics

Charleston, SC