U.S. consumer economic conditions remain strong, but declining confidence may be cause for concern

Monthly report on the consumer economic landscape from U.S. Principal Economist Michael Brown and U.S. Economist Eric Warner

October 31, 2019 – Retail sales (excluding auto sales) growth remained at 3.7 percent in September, marking the third month in a row of more modest consumer spending. Sales at restaurants, pharmacies and health care stores got a boost in September, while sales at gas stations, clothing and electronic stores declined. Retail sales excluding food services, gas stations, autos and building materials sales—which feed into the calculation of GDP—also stayed flat in September, indicating that GDP is unlikely to be impacted.

Forward looking indicators of the consumer sector such as average hourly earnings are pointing towards a more modest pace of consumer spending in Q4. Our focus will be on the consumer confidence measures as we look for signs that consumers are becoming worried about the economy

— said Michael Brown, Principal U.S. Economist at Visa.

Despite slowing job creation, the labor market continues to support consumer spending growth. However, drops in confidence and rising consumer goods prices are offsetting positive effects from the job market

— said Eric Warner, U.S. Economist at Visa.

Other highlights of this report:

  • Consumer confidence dropped nine points in September. Consumers’ declining future expectations drove the drop in confidence—the second largest since 2017. Consumers over 55 had the biggest decline in confidence, down 15 points in September.
  • The U.S. economy added 136,000 jobs in September, and August job growth was revised higher to 168,000 from the originally reported 130,000 gain. The unemployment rate fell to 3.5 percent, the lowest since December 1969, due largely to more individuals finding jobs. However, employment data confirms other key data showing the manufacturing sector is contracting, losing 2,000 jobs in September.

Download complete report (PDF), including key monthly consumer indicator charts

Line chart for U.S. Consumer Confidence Index, indexed to 100 in 1985 – ranges from 120.6 in September 2017 to 137.9 in October 2018 and 125.1 in September 2019.

Source: Visa Business and Economic Insights, Conference Board/Haver Analytics

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