The Soft Landing Is Dead

Confidence, PMI and the Beige Book All Point to a Downturn

The data released over the past forty-eight hours in the USA paint a picture that is no longer compatible with the idea of a soft landing. The Conference Board Consumer Confidence Index collapsed in November to 88.7 from 95.5, with the Expectations Index falling to 63.2, marking the tenth consecutive month below the recession-signal threshold of 80. But the most important part of the survey is not the headline reading, it is the labour-market signal embedded within it. The share of respondents saying jobs are “hard to get” continued to rise, while the share saying jobs are “plentiful” continued to fall, and as a result the jobs hard to get minus jobs plentiful differential increased again. This is the same pattern that has preceded every recession of the past three decades: perceptions of job availability deteriorate first, and the unemployment rate turns higher only afterwards. The deterioration in November confirms that labour sentiment is weakening, not stabilising.

Inflation expectations remain elevated at 4.8 percent, and the shift in spending intentions away from discretionary purchases and toward low-cost essentials is entirely consistent with rising financial stress. Plans to buy cars, appliances, electronics, homes, and vacations all declined, and confidence fell across almost all age and income groups, with the steepest declines among consumers above thirty-five and in middle-income brackets. Sentiment deteriorated across political affiliations, and more respondents now believe the economy is already in recession, which is a psychological signal that usually appears only when weakening conditions are being felt directly rather than inferred.