October 28, 2008 – The Conference Board’s Consumer Confidence Index plunged by 23.4 index points to an all-time record low of 38.0 in October (Chart 1). (The record starts in 1967.)
Historically, consumer confidence and consumer spending have not always moved in perfect step. But, both have entered a clear slowing trend since the middle of last year (Chart 2).
Real consumption edged up by only 0.1% in the twelve months through August (the latest available). This twelve-month trend was 1.9% in December and 3.1% in August last year.
For context, consumer confidence peaked at 111.9 in July last year. (That was its highest level since August 2001.)
With September’s declines in both light vehicle sales and in real non-auto retail sales, the trend in real consumption growth almost certainly continued to weaken in September.
Further, this big drop in October consumer confidence suggests that there is little hope for an October consumer rebound.
That’s bad news for the whole economy. In Q2, consumption accounted for about 71% of U.S. GDP.