US consumers less upbeat about economy: survey

WASHINGTON (AFP) - US consumer confidence suffered the biggest decline in more than three years in December amid a sharp selloff on Wall Street and political turmoil in Washington during the month, according to a survey released Thursday.

The cutoff date for the survey was December 13 before the US government shutdown over funding for a border wall but financial markets already were showing the impact of President Donald Trump’s trade conflict with China, as well as the prospect of a slowing economy amid rising interest rates.

The Conference Board’s consumer confidence index fell more than eight points to 128.1 - the largest decline since July 2015, the survey showed. That was five points below what economists forecast, and a retreat from the 18-year high of 137.9 in October.The decline was nearly all the result of the erosion of consumers’ confidence in the short-term economic outlook, as the expectations index fell more than 13 points to 99.1, back below 100 for the first time in a year. 

The Conference Board said it was the biggest drop in expectations since August 2011.

“While consumers are ending 2018 on a strong note, back-to-back declines in Expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019,” said Lynn Franco, the Conference Board’s director of economic indicators.

Analysts note that the decline reflects the falling stock market, which has erased all of the 2018 gains in just the last few weeks.

But while Wall Street look headed for another rout Thursday in the wake of the confidence data, bargain hunters came in the last 30 minutes of trading sending all three major stock indexes to solid gains at the close.

Economist David Deull with IHS Markit said that while the government shutdown was not yet a factor in waning consumer sentiment, he warned that if it “is prolonged with continued political bickering, consumer confidence could head further south.”Despite a strong labor market, consumers’ feelings about six months in the future have been moderating, indicating a sense the economy may have peaked.

A much smaller share now expect to see more jobs ahead, and a slightly larger amount anticipate fewer jobs will be available. The survey showed the same pattern about income.

“Expectations regarding job prospects and business conditions weakened, but still suggest that the economy will continue expanding at a solid pace in the short-term,” Franco said.

The US government shutdown, which stems from Trump’s demand for funding to build a southern border barrier, means financial markets will have limited official data to gauge the state of the economy which will tend to make them more reactive to any bad news.