Conference Board's Expectations Index Signals Recession Amid Government Shutdown Concerns

What's Happening?

The Conference Board's Expectations Index, which evaluates short-term outlooks for income, business, and labor market conditions, decreased by 1.3 points to 73.4 in September, signaling recessionary conditions. Consumer confidence also dropped sharply, with the Consumer Confidence Index falling to 94.2 from 97.8 in August. The Present Situation Index, which assesses current business and labor market conditions, fell seven points to 125.4. Despite Wall Street's optimism about avoiding a recession, consumer confidence is weakening, raising concerns about the sustainability of corporate growth. Inflation expectations eased slightly but remain elevated, with consumers' average 12-month inflation expectations at 5.8% in September, compared to 6.1% in August. The looming government shutdown could further complicate economic data reporting, as official data from the Bureau of Labor Statistics may be unavailable.

Why It's Important?

The decline in consumer confidence and the Expectations Index suggests potential challenges for the U.S. economy, as consumer spending is a critical driver of economic growth. The elevated inflation expectations could lead to changes in consumer behavior, potentially impacting demand and causing a wage-price spiral. The government shutdown poses additional risks by disrupting the availability of official economic data, which could hinder accurate economic forecasting and decision-making. Economists warn against relying solely on private sector data during the shutdown, as it provides a limited view of the economy.

What's Next?

The government shutdown may delay key economic reports, including the jobs report and consumer price index, complicating economic analysis. Economists and policymakers will need to navigate these uncertainties and assess the impact on consumer behavior and business conditions. The Federal Reserve may consider adjusting interest rates in response to the evolving economic landscape, while businesses and consumers may need to adapt to changing conditions.