"Affordability crisis"! Consumer confidence hits the second lowest since the pandemic, U.S. retail slumps

A series of weak economic data is intensifying market concerns about the health of the US economy. Retail sales growth has slowed sharply, consumer confidence has dropped to the second-lowest level in five years, showing Americans are cutting spending and the affordability crisis is beginning to impact consumption. US retail sales in September grew by just 0.2%, far below Wall Street expectations, ending the previous months’ accelerating trend. The Conference Board’s consumer confidence index plunged from 95.5 last month to 88.7 in November, the second-lowest reading in five years, just above the level seen this April. Rising prices in housing, groceries, and healthcare are pressuring low-income groups, while the wealthy benefit from booming stock markets and the wealth gap continues to widen. The labor market is also weakening, with the unemployment rate rising to 4.4% in September, a four-year high, and wage growth for low-income workers has slowed. Currently, Federal Reserve policymakers are weighing whether to implement the third interest rate cut this year at the December meeting, but last month’s record government shutdown delayed key economic reports, making it more complicated to assess the health of the economy. **Retail Sales Cool Sharply** The 0.2% increase in September retail sales marks a sharp reversal from the acceleration in previous months. Data released by the US Census Bureau fell short of market expectations, reflecting shrinking consumer spending. Oliver Allen, Senior US Economist at Pantheon Macroeconomics, pointed out: "Core retail sales in September were much weaker than in previous months. The stagnant labor market and tariff-driven price increases continue to drag real incomes, suggesting this slowdown may persist." Some economists believe Trump’s import tariffs are now reflected in consumer prices. Inflation data released Tuesday showed US wholesale prices rose 2.7% in the 12 months ending September, higher than expected, and wholesale prices typically lead consumer prices. **Consumer Confidence Plunges** Surveys by the Conference Board show that consumers’ short-term outlook for income, business, and labor market conditions continued to deteriorate in November. Dana Peterson, the agency’s Chief Economist, stated that consumer expectations for the labor market in mid-2026 "remain distinctly negative" while "expectations for household income growth have shrunk sharply." Tim Quinlan of Wells Fargo noted that the 88.7 reading is "far off" from 112.8 a year ago, and "a weak labor market and persistent worries about prices" are dragging down consumer sentiment. "Unemployment and consumer confidence are both testing levels not seen since 2021, underlining the urgency of the recent deterioration in labor market conditions—or at least consumers’ perception of those conditions." **Affordability Crisis Hits Economic Confidence** Cornell University economist Eswar Prasad warned, "US consumers seem to be losing faith in the economy’s resilience, and this could become a self-fulfilling prophecy dragging down growth." He pointed out, "Rising prices, coupled with worries about job prospects and housing affordability, are clearly hitting household confidence and their willingness to spend freely." While consumer inflation is about 3%, far below the peak of over 9% in 2022, price increases accumulated over the past five years have still hurt many Americans. Meanwhile, wage growth for low-income workers has slowed, and the labor market has noticeably cooled. Cost-of-living pressures have hit low-income groups nationwide, with prices for housing, groceries, and healthcare continuing to rise. On Tuesday, President Trump insisted at the White House turkey pardon ceremony that prices are falling, despite data showing the opposite. "This Thanksgiving, we’re also making incredible progress in making America affordable again," Trump said. "We’re now at levels we haven’t seen in a long time." This statement drew criticism, even from within his own party. Former Trump loyalist Representative Marjorie Taylor Greene harshly criticized the president for "manipulating" voters on prices and announced last week she would resign from Congress. **Federal Reserve Faces Policy Test** Federal Reserve policymakers are weighing whether to implement a third rate cut this year at the December meeting. Last month’s record government shutdown prevented key reports from being released, complicating their ability to assess the health of the economy. The labor market is showing increasingly clear signs of weakness. The unemployment rate hit a four-year high of 4.4% in September, and hiring has remained weak most of this year. Slowing wage growth for low-income workers has coincided with a rapid cooling in the labor market, further eroding consumers’ purchasing power. These factors are testing the Federal Reserve's ability to balance supporting economic growth and controlling inflation. **Risk Warning and Disclaimer** The market has risks and investments should be made with caution. This article does not constitute personal investment advice and does not consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions contained herein are appropriate to their particular circumstances. Investments made based on this information are at your own risk.