US consumer confidence fell sharply in October, according to a survey released on 19 October, but the result does not tell businesses how much customers have actually spent.
The LSEG/Ipsos Primary Consumer Sentiment Index dropped 5.3 points from September to 45.2, its lowest level since October 2011. The Ipsos release draws on an online survey of 1,000 Americans aged 18 to 74, conducted between 25 September and 1 October.
For retailers and other consumer businesses, the decline is a reason to examine demand more closely. It is not a measurement of transactions or a prediction that every category of sales will fall.
What consumer confidence measures
Consumer confidence describes people’s assessments of economic conditions and their own financial circumstances. Surveys can capture expectations, uncertainty and willingness to make major purchases before those views appear in spending records.
An index combines responses into a summary measure. A reading of 45.2 does not mean that 45.2% of consumers are pessimistic, and the monthly fall is measured in index points, not a percentage decline in spending.
The Ipsos results measure attitudes among the adults surveyed, with demographic weighting. They do not follow the bank transactions of those same people.
Spending figures answer a different question
The latest available US Bureau of Economic Analysis spending report covers August, an earlier period than the confidence survey. Personal consumption expenditures, the agency’s broad measure of consumer spending, increased 0.9% from July in current dollars.
After adjusting for price changes, spending rose 0.6%. Real disposable personal income, meaning income after personal taxes and inflation, was unchanged.
Those figures cannot establish that the people who became less confident subsequently spent more. The periods, samples and measurements differ. They do demonstrate why an attitude survey and an expenditure report should not be treated as interchangeable evidence.
Even within a company’s accounts, higher sales revenue need not mean customers bought more products. Higher prices can lift receipts while the number of items sold remains flat or falls.
A household can worry and still make purchases
Much household expenditure is difficult to postpone. Rent, groceries and essential travel continue even when people become anxious about their finances. Other purchases can be delayed, reduced or redirected towards cheaper alternatives.
A hypothetical household might retain its grocery budget but postpone replacing a sofa. A supermarket and a furniture retailer could therefore experience different demand despite serving customers with similar economic concerns.
Households also have different financial cushions. MBN’s reporting on US families’ debt-payment burdens examines why aggregate wealth figures can conceal pressures on particular borrowers.
What businesses can check next
A retailer assessing weaker confidence can compare the number of transactions, items per basket and prices paid. Changes in premium-product sales, repeat purchases and discount use can help distinguish customers leaving from customers trading down.
Profit margins matter alongside sales. Maintaining revenue through deeper discounts may protect volume while weakening earnings. Conversely, fewer transactions do not establish that every customer group is cutting back.
The next BEA income and spending release, scheduled for 29 October, will provide September expenditure data. It will add a more recent record of purchases to the October survey’s evidence about attitudes, while still covering a different period.
