US consumer expectations as measured by The Conference Board Consumer Confidence Index ticked up in October, but this followed three months of declines. Did the declines signal recession in 2022 or just a hiccup related to the Delta variant? We propose the latter.

Indeed, material downshifts in the consumer expectations gauge, with the exception of the pandemic, have preceded US recessions. However, closer examination of the index reveals at least 18 instances since the inception of the measure when there were 10 point or more declines in the index that did not predict recession (Figure 1). Notably, those dips often coincided with shocks to the economy, including wars, bad weather, and happenings in Washington, DC (Figure 2). Indeed, the three month decline in expectations this year occurred while the Delta variant swept across the nation – a sort of shock within the pandemic shock. Notably, consumer expectations were rising earlier this year as vaccinations rose, mobility restrictions lessened, and in-person services began to reopen.

More important than the change in the gauge is the level. Presently the expectations gauge stands at 93.1, which is consistent with an expanding economy. Historically speaking, a reading above 80 signals an economic expansion. Finally, underlying gauges for the expectations index signal continued upbeat sentiment among US consumers. More consumers expect better business, employment, and income conditions six months forward than those expecting worse. Notably, 24.3 percent expect an improved business environment ahead versus 21.1 percent expecting poorer conditions next year (Figure 3). Should these perceptions turn negative, as well as other leading indicators, then we might consider the prospect of recession.