Whether your bank account likes it or not, the shopping season is here. But this year, the stakes are much higher than usual: Neither the slowing economy or U.S. retailers can afford to see household spending drop off.
And on that front, there are troubling signs. Consumer confidence dropped for the fourth straight month in November, according to The Conference Board’s Consumer Confidence Index. The index came in at 125.5, down from 135.8 in July and 136.4 last November. And 66% of Americans believe the U.S. will enter a recession over the coming 12 months, according to a Fortune-SurveyMonkey poll of 10,000 respondents released yesterday.
The fear for U.S. retailers and economists is that falling confidence could spill over into tighter pocketbooks this holiday season. In the third quarter, U.S. GDP grew just 1.9%, with exports and private investment falling. If not for consumer spending, which jumped 2.9%, a recession might already be a reality.
However, falling confidence doesn’t always bring with it a drop in consumer spending. In fact, many retailers still have a rosy outlook: The National Retail Federation forecasts a 4% uptick in spending this holiday season. A number of retailers are actually increasing their fourth quarter financial forecast, including Best Buy, Dick’s Sporting Goods, Nordstrom, and Target.
“The consumer is certainly solid,” said Paula Price, CFO of Macy’s last week. J.C. Penney CEO Jill Soltau echoed that sentiment saying: “We share the industry view that the consumer continues to be in a good place right now: low unemployment, better wages.”
The same Fortune-SurveyMonkey poll that found that the majority of Americans foresee a 2020 recession, also found that households with increasing spending still far outnumber those with tightening budgets. Despite sour outlooks, Americans are still throwing down money for the latest appliances and gadgets.
“It’s worth watching consumer confidence, but it’s always easy to overstate. The fact consumer confidence is up or down, doesn’t mean [spending] will go the same way,” says Scott Hoyt, head of consumer economic research at Moody’s Analytics. He says it’s more important to follow household income growth, which is still rising.
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