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Consumer confidence ticks lower in October: Conference Board

Yahoo Finance’s Alexis Christoforous and Brian Sozzi discuss consumer confidence with The Conference Board Senior Economist, Erik Lundh.

Video Transcript

BRIAN SOZZI: Consumer confidence is slipping a bit as stimulus talks falter and the jobs picture get shakier. With us now is Eric Lundh, senior economist at The Conference Board. Eric, good to see you this morning. So consumer confidence under pressure-- are we watching the consumers simply get more nervous ahead of the holiday season with no stimulus?

ERIK LUNDH: I mean, there's a lot of things that are weighing on the consumer right now. It's a complicated puzzle. You know, for the most part, the October number-- it was down a touch, but it's pretty much a neutral rating. If you look under the hood and you examine some of the pieces of the index, consumers are reporting that the present situation through their perspective has improved, but that expectations about the future fell a little bit.

Some of-- one of the biggest drivers in these movements is their perceptions about the job market, so consumers are reporting that in terms of the job market at present, they're having more of a favorable attitude towards that. But their expectations about the future labor market are weakening just a touch.

So the rating kind of suggests that we're entering the fourth quarter, but we're not going to see a lot of movement. We're not expecting a real acceleration in growth. But unfortunately, we have the situation with COVID-19 numbers rising, which could be disruptive. In terms of some of the things that could help consumer confidence, the government stimulus that you mentioned would be very helpful, but really the job numbers are quite critical as well. Better job market, better consumer confidence. Weaker job market, weaker confidence.

ALEXIS CHRISTOFOROUS: Eric, what about when you look out to the future-- short term versus longer term? How do people feel? Are they feeling better about short-term prospects versus longer term? And I guess by short term, I guess I mean in the next six months versus beyond that.

ERIK LUNDH: Well I think there is a lot of apprehension about the winter, that the virus, of course, has been ticking up here in the US and elsewhere. There are concerns about that, but I think that consumers and a lot of people here are looking at into next year. They're thinking stimulus is going to eventually land. They're thinking that a virus-- I'm sorry, an inoculation to the virus-- is going to be had at some point. So I think longer term the expectations are a little rosier than sort of the immediate future in front of us.

BRIAN SOZZI: Eric, just based on what you've seen from the coronavirus infections going up and what we're hearing from companies this earnings season, do you think GDP declines in the fourth quarter?

ERIK LUNDH: No, we're actually projecting that we maintain the relatively stable GDP. We-- our forecast for the fourth quarter is 1.5%, so a slight uptick. But in general, there's going to be a bit of a lull in the recovery over the next couple of months as we approach the end of the year. Fortunately we're expecting things to pick up a little bit more into 2021 once we're out of the COVID/flu season. Hopefully with the deployment of some sort of a vaccine, additional government stimulus-- these are all things that are going to sort of push the growth numbers a little bit higher as we cross into next year.

ALEXIS CHRISTOFOROUS: What does this report, you think, tell you, if anything, about what kind of holiday season we're going to have and how confident people are going to feel about going out and spending?

ERIK LUNDH: Sure. I mean, at this point we're not expecting a major shift from the overall spending that we saw last year necessarily, but the composition of that spending is going to change. We're not expecting services to capture as much spending as consumers continue to socially distance and maybe don't go out of their homes quite as much. But spending on goods and durable goods is going to be probably a little bit stronger than it was last year. And I think the online retail environment is better positioned to capture some of this increased demand for goods than some of the retail brick-and-mortar outlets.