The Consumer Confidence Index slumped to 102.5 from a revised 107.8 in September as high borrowing costs and soaring inflation took their toll on household budgets, said the board, which groups public and private corporations that track and publish economic data.
“Consumers’ expectations regarding the short-term outlook remained dismal,” Conference Board Senior Director of Economic Indicators Lynn Franco said. “The Expectations Index is still lingering below a reading of 80 - a level associated with recession - suggesting recession risks appear to be rising.”
Consumer spending - the driver of the US economy - was strong through the coronavirus pandemic as Americans resorted to online buying amid lockdowns. With social curbs now lifted, spending has remained robust on travel and dining out - two activities severely restricted by the pandemic measures.
However, a global imbalance of supply and demand has led to four-decade highs in inflation in the United States, which the Fed is trying to curb through a series of jumbo-sized rate hikes. That has pushed up borrowing costs, adding to higher overall expense for consumers, some of whom have begun to rein in their spending.
Inflation, as measured by the Consumer Price Index, stood at 8.2% for the year to September, not too far from the 40-year peak of 9.1% during the 12 months to June.
The Fed’s target for inflation is 2% per year and it has said it will not back off on interest rate hikes until it achieves its aim. Since March, the central bank has raised rates by 300 basis points from an original base of just 25. The Fed intends to add another 125 basis points to rates before the year-end.