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Consumer Confidence is Up, but CFOs Fear a Slowdown in Demand

The Conference Board, a business research organization, recently reported that US consumer confidence in September reached an 18-year high. A measurement of consumer's assessment of current economic conditions and their outlook over the next six months, the index climbed to 138.4 in September, up from 134.7 in August. The confidence levels are supporting healthy consumer spending and a US economy that grew at a rate of 4.2%, the fastest annual rate in nearly four years.

According to CNBC's Global CFO Council quarterly survey, however, as of the third quarter consumer demand concerns unseated trade policy as the biggest external risk factor that businesses are currently facing. Of those CFOs surveyed, 45.8% find consumer demand the most concerning factor, up from 21% in the first quarter. This is the highest level recorded in the last two years. Trade policy topped out at 30% but has since dropped to 10.4%.

The consumer confidence index increase should be a welcome breath to retailers coming into the holiday season, but it is worth noting that consumer confidence is a lagging indicator. With CFOs anticipating likely increases in labor and raw materials costs as well as the cost of capital, it is prudent for retailers, and business leaders in every sector, to make strategy adjustments to stay ahead of potential changes in the market. 

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