Consumers are less than sanguine about their near-term income prospects.
The negative sentiment about the money that’s hitting their accounts each pay cycle may in turn prove a negative read-across for merchants and other firms dependent upon individuals’ and households’ resilience.
The latest Consumer Confidence Index from The Conference Board declined this month and is now at levels that signal a recession.
As to what lies ahead, the Expectations Index — which gauges the short-term outlook for income, business and labor markets — declined to a reading of 73.7 in September, down from 83.3 in August.
Typically, when the reading is below 80, a recession within the next 12 months is likely, The Conference Board said.
In a statement, The Conference Board Chief Economist Dana Peterson took note of September’s “disappointing headline number” and added that consumers have expressed concerns about “higher interest rates. The decline in consumer confidence was evident across all age groups, and notably among consumers with household incomes of $50,000 or more.”
The data showed that 16.3% of consumers expect their incomes to increase, down from 18.7% in August. And 14.4% of consumers expect their incomes to decrease, up from 11.9% last month.
The data from The Conference Board dovetails with PYMNTS Intelligence about wages earned and the ultimate impact of inflation.
Seventy-two percent of employed consumers told PYMNTS their income has not kept up with inflation or has barely kept up with it. More than 41% of individuals earning between $50,000 and $100,000 expressed that sentiment, while more than 37% of individuals earning more than $100,000 said so.
One way to combat the ravages of inflation lies with taking on more work, wherever possible. PYMNTS found that 41% of employed consumers have picked up extra work.
The September report from The Conference Board, with its nod toward inflation, mentioned concerns over groceries and gasoline in particular. Separate PYMNTS Intelligence indicated that 70% of grocery shoppers and 67% of retail customers expect significant price increases in the next 12 months. Consumers do not expect inflation to return to normal until the end of 2024.
Nearly 60% of consumers have trimmed their spending on clothing and accessories, with 4 in 10 trading to less expensive brands.
It’s the merchants who might feel the pinch, as earlier this year, PYMNTS Intelligence found that individuals are 21% more likely to report making retail cutbacks than grocery cutbacks. A third said they would reduce their spending on clothing too.
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