After four consecutive months of declines, consumer confidence rose slightly in September to 45.4, but remains severely challenged.
Confidence has fallen sharply since its February peak of 72.0, reaching its lowest point in August since April 2009 – before the recession ended. Although the August result was likely exaggerated by the fiasco surrounding the debt ceiling negotiations, the focus has again shifted to the slowing U.S. economy, providing little reason for a resurgence in optimism.
The pessimistic tone appears unlikely to improve meaningfully in the months ahead, given the significant uncertainty regarding the near-term outlook for the U.S. and global economy. Consumers remain keenly aware of the softening economic picture, which has the potential to exacerbate a jobs market that never recovered from the last recession.
Collectively, consumers are still in a pessimistic mood about the near-term outlook for jobs and the economy. The risk of a vicious cycle of poor confidence restraining spending and ultimately causing a further slowdown in the economy is a very real one.
Ultimately, the risk of a recession continues to increase, and the capital markets are taking notice. The potential for rallies on positive news still exists, and the potential for positive news in the form of greater intervention to ease risks in Europe, or unexpected intervention in the form of additional easing by the Fed, would be a welcome development. The former appears to be starting to take shape; the latter appears unlikely in the near-term.