Foodservice Equipment Reports

Consumer Confidence: Need You Ask? But Consumers (And Operators) Spend Anyway

Consumer confidence has generally been considered a good driver of consumer spending. But recent data shows a bit of disconnect. Both major measures of consumer confidence remain at recession levels. The Consumer Confidence Index from the Conference Board fell in October to 39.8 from 46.4 in September. The Thomson-Reuters/University of Michigan Consumer Sentiment Index rose slightly to 60.9 in the final October reading from 59.4 in September, but stands 10% lower than this time last year and at a level similar to that of late 2008 and ’09, the depths of the Great Recession.

Government gridlock over deficit reduction versus job-creation policies are a major factor in consumer pessimism, according to Richard Curtin, chief economist for the group’s Surveys of Consumers. “The upcoming debates about spending cuts and tax hikes surrounding the budget resolution will increase uncertainty and cause consumers to become even more prudent spenders,” he said. So expect consumer confidence to get even worse in November.

But go figure. The latest monthly and quarterly data on consumer spending were much stronger than anyone expected. In fact, many analysts began to worry that consumers are adding debt again, as the income increase numbers were significantly lower.

We think the reasons are simple, and not that different from why equipment and supply spending seems significantly stronger than the underlying operator data: People are tired of pinching pennies and in addition, capital goods are wearing out. Durable goods spending for cars and appliances were big parts of the consumer gains. And early third-quarter data from E&S public companies and MAFSI show good gains too. We’ll detail next Fortnightly.

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