Don’t Feel So Good

US consumer confidence drops in September

Image source: charnsitr - Shutterstock, Mr. Spoiler - YouTube

What's going on?

Survey results out on Tuesday showed consumers don’t feel so good about the state of the US economy. Their vanishing confidence could be a self-fulfilling prophecy – which wouldn’t bode well for stocks.

What does this mean?

American consumers were asked how confident they are in the economy this month – and, compared to August and to economists’ predictions, that confidence had evaporated faster than Spider-Man after the Thanos snap.

Consumers’ shoulders appear to have dropped given the recent escalation of tariff-driven entanglements between the US and China – as well as a declining belief that job opportunities are plentiful in the, er, land of opportunity (consistent with data earlier this week). In fact, the lack of certainty on how both of these might affect the economy going forward led consumer expectations to fall to their lowest level since January.

Why should I care?

For markets: An important signal.
Falling confidence might lead consumers to spend less, so the strong US economic activity reported on Monday might yet be a bright spot in an otherwise gloomy trend. Survey data doesn’t have the weight of “hard” economic figures, but 65% of the US economy is comprised of the services industry – which is largely driven by consumer spending. It’ll therefore be important to investors forecasting the overall growth of the US economy: economists currently think it grew 2% larger this quarter than the same time last year.

For you personally: Housing drives confidence.
Data out on Tuesday also showed that US house prices were up “just” 3% in July, and prices in 20 major cities rose “only” 2% higher than a year ago – the slowest increase in almost seven years. Two-thirds of Americans own a home: if you’re among them, how you feel about your wealth – and by extension your confidence in the economy – will likely be inextricably linked to the value of your property.

Originally posted as part of the Finimize daily email.

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