Concerns about prices as well as future employment prospects continue to dampen U.S. consumer sentiment, with inflation in particular expected to be a drag on holiday spending compared to last year.

The Conference Board's Consumer Confidence Index decline less than expected in October to 94.6, down from a revised 95.6 (previously 94.2) in September, and above expectations of 93.4 in the Econoday survey of forecasters.

Consumers' assessment of current business and labor market conditions improved, while their short-term outlook for income, business, and labor market conditions remained pessimistic remaining well below the threshold that indicates a recession ahead.

Consumers' view of current business conditions inched upward, while their appraisal of current job availability improved for the first time since December 2024, the report said. Consumers were a bit more pessimistic about future job availability and future business conditions while optimism about future income retreated slightly.

Higher prices remain top of mind, clouding views of the economy, while there were less mentions of tariffs, but remain at an elevated level. Mentions of jobs and employment eased somewhat after picking up in September... . References to US politics were up notably, with the ongoing government shutdown mentioned multiple times as a key concern, the Conference board said.

Average one-year inflation expectations rose to 5.9 percent in October from 5.8 percent in September.

The Conference Board also said the share of consumers expecting a recession over the next 12 months declined in October, but the share of those who believe the economy is already in a recession rose for the third straight month.

On a six-month moving average basis, purchasing plans for autos both new and used increased. Plans to buy a home shrank in October, but the six-month average is trending upwards. Plans to buy big-ticket items were mixed but changed little overall. Intentions to purchase services in the coming months improved compared to September.

Finally, [p]reliminary data suggest that consumers' holiday spending will be down this season compared to last year, the report said. Most purchases are expected to take place between October and the end of the year, with November seeing the largest share of planned spending.

The consensus looks for 93.4 in October versus 94.2 in September and 97.8 in August as consumers are gloomy about current conditions and the outlook.

The Conference Board's confidence report surveys consumers on their assessments of the labor market, business activity, and their own financial conditions. The survey is conducted by Toluna, an online community platform. (Conference Board and Toluna)

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer confidence index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.