As the holiday season is about to kick in, consumers’ concerns about inflation are creeping up again, as shown by the confidence index which fell in October following back-to-back monthly gains and was lower than expected.

                By                    Yaёl Bizouati-Kennedy

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The Conference Board said its Consumer Confidence Index decreased in October, standing at 102.5, down from 107.8 in September, according to an Oct. 25 press release. Gas and food prices are driving consumers’ concerns, the board reported.

This latest figure was also lower than anticipated, as a Bloomberg survey of economists called for a drop to 105.9.

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And consumers’ expectations for the short-term outlook are gloomy as well, the Conference Board shared, which suggests that recession risks appear to be rising.

“People are looking toward the holidays with all the expenses and wondering if they’ll have enough money to go around. It creates a new risk for the economy at this key time in the year.”

Lynn Franco, senior director of economic indicators at The Conference Board, called consumers’ expectations regarding the short-term outlook “dismal,” as the Expectations Index is still below 80 — a level associated with recession, according to the release.

MarketWatch reported that consumer confidence can hint at household spending, “which is a major growth driver for the U.S. economy.”

Franco added that “looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers. And, given inventories are already in place, if demand falls short, it may result in steep discounting which would reduce retailers’ profit margins.”

In addition, consumers were conflicted about the short-term labor market outlook, with 20.8% anticipating fewer jobs, up from 17.8%.

Roach added that in turn, the Federal Reserve will likely hike rates by 0.75% in November to cool inflationary pressures.

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“But the magnitude at the December meeting is a bit of a wild card since strong consumer demand will keep upward pressure on prices. The biggest risk is the unknown lagged effects from the Fed’s cumulative tightening and the economy may not feel the full effects until next year when recession risks are high,” Roach added.

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