Conference Board: Consumer Confidence Rises in October

Updated on Oct. 27.

Consumer sentiment continues to fall amid uncertainty over the war in Iran and rising gas prices.

University of Michigan: Sentiment changed little in October

The University of Michigan’s Index of Consumer Sentiment held nearly steady in October, slipping just 0.1 index point from September, according to the final results for the month released on Oct. 23. The survey indicates consumer sentiment is down 10.4% from a year ago.

The Current Economic Conditions Index fell to 46.7 from 50.9 in September, driven entirely by an 18% plunge in buying conditions for durable goods, such as appliances, electronics and vehicles. The Index of Consumer Expectations rose slightly from 46.3 in September to 48.8 in October.

“Purchasing power continues to dominate consumer views of the economy,” Surveys of Consumers Director Joanne Hsu said in a release. Consumers cited higher interest rates and growing concerns about affordability.

Year-ahead inflation expectations rose to 4.7% from 4.6% in September, while long-run inflation expectations increased to 3.5% from 3.4%. Both measures rose for a second consecutive month, reaching their highest readings since May.

Conference Board: Confidence is up in October

The Conference Board’s Consumer Confidence Index rose 7.5 points to 91.7 in October, up from a revised 84.2 in September. The survey period ran Oct. 1–21.

The bump in consumer confidence was primarily due to improved views of business conditions, according to the release. “The recovery was in line with retail gasoline prices easing from September to October,” said Fergus McCormick, senior economist at The Conference Board, in a release. “Yet, despite the increase in October, consumer confidence remained on the long-term downward trend that’s persisted over the past few years

The Present Situation Index rose 8.6 points to 120.4, reflecting improved views of current business and labor market conditions. Meanwhile, the Expectations Index increased 6.9 points to 72.6, partially reversing three monthly declines in a row.

Here are some other key findings from the report:

Spending plans: Expected spending on services and durable goods generally declined over the next six months.

Current business conditions: Consumers’ views improved, with 21.4% saying conditions were good, up from 18.8% in September.

Labor market: Perceptions improved, with 26.7% of consumers saying jobs were plentiful, up from 24.3% in September.

Prices: Consumers continued to express concerns about rising costs, particularly food, groceries, oil and diesel prices.

Inflation expectations: Consumers’ average 12-month inflation expectations fell to 5.8% but still remained elevated.

New York Fed: Consumer financial unease grows

The New York Fed’s August Survey of Consumer Expectations, released Oct. 7, shows consumers are feeling increasingly uneasy about their future financial situation. Inflation expectations increased to 3.9% at the one-year-ahead horizon, the highest reading since May 2023. Concern about unemployment improved slightly, however, with 43.9% expecting the jobless rate to be higher a year from now.

A growing number of households surveyed say their financial situation had worsened over the past year. Those expecting their situation to get worse over the next year also rose.

The survey was conducted Sept. 1 through Sept. 30.

More findings below.

What is consumer sentiment?

Consumer sentiment, also known as consumer confidence, is an index of how U.S. consumers are feeling about the current and future state of the economy, and all that folds into the economy: the job market, wages, business conditions and their personal finances. It’s a valuable tool for economists, as consumer sentiment can be used as an early predictor of economic changes.

How people feel about the economy can directly impact the economy, because consumers' attitudes often affect how much they spend on things like food, transportation, household goods, entertainment and more.

In 2023, consumers’ personal spending made up 67.9% of the U.S. GDP, or gross domestic product, according to the Federal Reserve Bank of St. Louis. That’s a significant majority of the nation’s GDP, so keeping a close eye on consumer sentiment is key in foreseeing potential economic slumps or rallies.

When the economy is in a recession, consumer sentiment falls. On the flip side, when the economy is expanding, consumer sentiment rises. The index does typically peak before a recession, though.

Unlike other indexes, such as the Consumer Price Index (CPI), consumer sentiment isn’t calculated using spending data or hard figures. Instead, economists rely on two major surveys of consumer confidence: The University of Michigan’s Surveys of Consumers and the Conference Board’s Consumer Confidence Survey.

Each survey collects the general attitudes and opinions of hundreds of U.S. consumers. Then, those opinions are assigned numeric values and aggregated into one number, or index.

What is consumer sentiment like right now?

Final results for October from the University of Michigan, released on Oct. 23 show:

The Index of Consumer Sentiment registered at 48, down from 48.1 in September.
Current Economic Conditions registered at 46.7, down from 50.9 in September.
The Index of Consumer Expectations registered at 48.8, up from 46.3 in September.

How the University of Michigan creates its index

The Index of Consumer Sentiment is one of three indexes derived from the University of Michigan’s Surveys of Consumers, which started in 1946. Originally conducted annually, the surveys switched to a monthly cadence in 1978. The surveys have a sample size of roughly 600 people selected randomly from the 48 adjoining U.S. states and the District of Columbia.

The surveys include roughly 50 questions covering personal finances, business conditions and buying conditions. From those surveyed, three indexes are produced: the Index of Consumer Sentiment, the Index of Consumer Expectations and the Index of Current Economic Conditions.

The Index of Consumer Sentiment is the most commonly cited index of the bunch. It’s derived from these five questions:

"We are interested in how people are getting along financially these days. Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"
"Now, looking ahead: Do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"
"Now, turning to business conditions in the country as a whole. Do you think that during the next twelve months we'll have good times financially, or bad times, or what?"
"Looking ahead, which would you say is more likely: that in the country as a whole we'll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?"
"About the big things people buy for their homes, such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?"

Historically, the surveys have been conducted by phone. Starting in July 2024, they'll be conducted online, with researchers aiming for 900 to 1,000 respondents.

Conference Board’s Consumer Confidence Index

Conference Board data for October, released on Oct. 27, shows:

The Consumer Confidence Index rose by 7.5 points to 97.7.
The Present Situation Index rose by 8.6 points to 120.4.
The Expectations Index rose 6.9 points to 72.6.

How the Conference Board’s Consumer Confidence Index comes together

The Conference Board’s Consumer Confidence Survey was launched in 1967 as a mail survey conducted every other month. Today, the survey is conducted online, on a monthly basis, with a sample size of roughly 3,000 respondents.

The Conference Board issues a five-question survey to calculate three distinct indexes: the Consumer Confidence Index, the Present Situation Index and the Expectations Index. Once the surveys have been completed, each question is given a relative value. Then, those values are compared against their relative values from 1985 — the survey’s benchmark year, with an index set at 100.

The Consumer Confidence Index is the average index for all five questions. The Present Situation Index is calculated using the average indexes for the first two questions, and the remaining three questions determine the Expectations Index.

Present Situation Index

Respondents’ appraisal of current business conditions.
Respondents’ appraisal of current employment conditions.

Expectations Index

Respondents’ expectations regarding business conditions six months hence.
Respondents’ expectations regarding employment conditions six months hence.
Respondents’ expectations regarding their total family income six months hence.

Consumer Confidence Index

This is the average index for all five questions above.

The Federal Reserve Bank of New York’s Survey of Consumer Expectations

Some highlights from the Federal Reserve Bank of New York’s August Survey of Consumer Expectations, released Oct. 7:

Inflation. One-year inflation expectations increased 0.3 percentage point to 3.9%, while three-year expectations edged up to 3.3%. Five-year expectations were unchanged at 3.0%.
Prices. Consumers expect gas prices to rise 4.8% over the next year, up 0.2 percentage points from August. Expectations also rose for food, medical care, college tuition and rent.
Jobs. The outlook for the labor market improved slightly. The perceived probability that unemployment will be higher a year from now declined 0.5 percentage point to 43.9% — still above the 12-month trailing average. People also became more confident they could find a job if they lost their current one.
Job loss and quitting. Consumers were slightly less worried about losing their jobs, with the perceived probability falling to 13.5%. At the same time, expectations for voluntarily leaving a job rose to 19.9%.
Household spending. Expected spending growth increased to 5.5%, from 5.2% in August — the highest reading since May 2023.
Credit and debt. Consumers reported that credit was getting harder to access, although the perceived probability of missing a minimum debt payment over the next three months fell to 12.2%.
Financial situation. Consumers grew more pessimistic about their finances, with more households saying their financial situation had worsened over the past year and fewer saying it had improved. Expectations for the year ahead also deteriorated.

How the Federal Reserve Bank of New York conducts its survey

The Federal Reserve Bank of New York’s Survey of Consumer Expectations focuses on expectations about economic outcomes.

The survey, which is conducted by NielsenIQ, launched in 2013. It’s an internet-based survey that asks a rotating panel of 1,300 heads-of-household about their expectations of the economy, as well as their own personal finances related to the following categories:

Inflation:

Inflation expectations.
Inflation uncertainty.
Probability of different inflation outcomes.
Home price change expectations.
Home price change uncertainty.
Commodity price change expectations.

Labor market:

Earnings growth expectations.
Earnings growth uncertainty.
Job separation expectations.
Job finding expectations.
Moving expectations.
Expectations of higher unemployment.

Household finance:

Household income growth expectations. Household spending growth expectations. Change in taxes. Change in credit availability. Debt delinquency expectations. Expectations of higher interest rate on savings accounts. Household financial situation.Expectations of higher stock prices. Government debt growth expectations.

» MORE: Current rate of inflation and why it matters