Puzzling Drop in Consumer Confidence

Consumer Confidence Falls Flat in November

A Puzzling Drop

November’s 2.0 percentage point drop in Consumer Confidence is puzzling for a number of reasons. The general consensus had called for a modest rebound, following October’s decline, which was widely thought to have been tied to the partial federal government shutdown. While we had projected a smaller than consensus rise, at least a modest rebound seemed likely, particularly given the continued drop in weekly jobless claims and continued slide in retail gasoline prices. One possible explanation is that consumers are still frustrated with the unsettled policy debate over the federal budget and debt ceiling, which were merely pushed into early 2014.
 My view:

There is no puzzling drop when one looks under the surface of the economy.

While headline unemployment numbers drop, the participation rate in the workforce remains at low levels.

Compounding the issue, demographics suggest and aging population will spend less, not more over time.  Yes, the USA has likely entered a Japan like deflationary slump.

Numbers in the new year may confirm this hypothesis.