Does lower consumer confidence mean lower spending?

There are signs the labor market is cooling, and if you look at the latest consumer confidence data, consumer spending could be next.

Unexpectedly, consumers have been quite resilient lately. Even as Americans feel the pinch of inflation and brace for an economic downturn, we’ve been buying a lot of stuff.

We learned on Tuesday that a Conference Board measure of consumer confidence fell for the third month in a row. And Lynn Franco, the group’s director of economic indicators, said lower confidence is prompting caution, leading to a potential pullback in spending.

Or at least it was.

“You can’t trust the old rules of thumb,” said Robert Frick, an economist at Navy Federal Credit Union. “You basically have to wipe the board and come to new conclusions.”

Normally when we all panic about a possible recession, Frick said Americans have been feeling the economic turmoil for some time already.

But Betsey Stevenson, an economist at the University of Michigan, said certain things protect many of our budgets from inflation.

“The first is that people have accumulated a lot of savings during the pandemic,” Stevenson said.

You know, emergency checks, all that time at home.

“And I think for a lot of households right now, even though they’re very worried about the economy, they’re thinking, ‘At least I have a reliable job,'” she said.

As the labor market cools, Stevenson predicts so will consumer spending. And for some low-income households, it already is.

“There’s kind of a story of two consumers here, where one is much more impacted,” Franco of the Conference Board said.

We see signs of change in consumer behavior. This week, Walmart said its customers are spending less on discretionary goods and more on basic necessities like groceries.

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