Looming recession? Falling consumer confidence is a strong indicator of the economic slowdown

Crash of the economy stock photo

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Although job and wage growth is on the rise, the US economy could experience an economic recession by the end of 2021, according to economists David Blanchflower of Dartmouth College and Alex Bryson of University College London .

See: IMF lowers US growth forecast, citing supply chain disruptions and inflation
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The Conference Board and University of Michigan consumer expectations indexes show declines in consumer sentiment, who tend to reliably predict economic downturns up to 18 months in advance, Fox Business reported. . Since the 1980s, each recession has been preceded by a 10 point drop in the expectations indices.

In September, the Conference Board posted the third straight decline in consumer expectations in as many months. Expectations are now the lowest since November 2020. However, the University of Michigan gauge rose in September. Blanchflower and Bryson noted that Michigan data likely showed its peak in June 2021, then dropped in August, while Conference Board data peaked in March 2021 and then dropped through September. Economists have pointed to “sharp downward movements in consumer expectations” over the past six months as an indication of a coming recession, Fox Business reported.

Related: As Anxiety Rises At The Grocery Store, Over Half Of U.S. Shoppers Demand Supply Chain Transparency

Typically, a decline in consumer confidence would be accompanied by higher unemployment rates and lower employment rates. However, government stimulus packages and the unprecedented events of the past year could support the labor market. Without these actions, a recession might have been inevitable.

Economists have highlighted supply chain issues as the holiday season approaches, continued debt ceiling battles, and the Delta coronavirus variant as factors that could drag the United States into a recession.

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Despite consumer sentiment, Wall Street remains bullish on the economy, IBTimes.com reported.

Last updated: October 12, 2021

About the Author

Dawn Allcot is a full-time freelance writer and content marketer with an interest in finance, e-commerce, technology, and real estate. Its long list of publishing credits includes Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, tech and entertainment website. She lives in Long Island, New York, with a real menagerie that includes 2 cats, an exuberant kitten and three lizards of different sizes and personalities, as well as her two children and her husband. Find her on Twitter, @DawnAllcot.


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