Recession Looming? Decline in Consumer Sentiment Is Strong Indicator of Economic Downturn

Economy Crash stock photo
sefa ozel /

Although employment and wage growth are on the rise, the U.S. economy could see an economic recession by the end of 2021, according to economists David Blanchflower of Dartmouth College and Alex Bryson of the University College London.

See: IMF Downgrades US Growth Forecast Citing Supply Chain Disruptions, Inflation
Explore: Grocery Shortage Costs Are Falling to US Consumers — and 64% Are Fed Up, Survey Says

Consumer expectations indices from the Conference Board and the University of Michigan show downturns in consumer economic sentiment, which tend to reliably predict economic downturns up to 18 months in advance, Fox Business reported. Since the 1980s, every recession has been preceded by a 10-point drop in expectations indices.

In September, the Conference Board showed the third consecutive decline in consumer expectations in as many months. Expectations are now the lowest since November 2020. However, the University of Michigan gauge rose in September. Blanchflower and Bryson noted that the Michigan data likely showed its peak in June 2021 and then fell in August, while the Conference Board data peaked in March 2021 and then fell through September. The economists pointed to “clear downward movements in consumer expectations” over the past six months as indication of an oncoming recession, Fox Business reported.

Make Your Money Work for You

Related: As Anxiety at the Grocery Store Mounts, Over Half of US Shoppers Demand Supply Chain Transparency

Typically, drops in consumer sentiment would be accompanied by rising unemployment rates and falling employment rates. However, government stimulus programs and the unprecedented events of the past year may be propping up the labor market. Without these actions, a recession may have been inevitable.

The economists pointed to supply chain issues heading to the start of the holiday season, continuing fights over the debt ceiling, and the coronavirus Delta variant as factors that could drive the U.S. into a recession.

Recessions Explained: Definition, Warning Signs and What Happens During One
Learn: Don’t Qualify for SNAP? The Commodity Supplemental Food Program Could Help Seniors Get Food

In spite of consumer sentiment, Wall Street remains bullish on the economy, reported.

Last updated: October 12, 2021

Share this article:

facebook sharing button
twitter sharing button
linkedin sharing button
email sharing button
Make Your Money Work for You

About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
Learn More


See Today's Best
Banking Offers