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US consumer confidence deteriorated in October and rebounded gains in September as worries over food and gas price inflation reignited, a potential warning for holiday retailers.

The consumer confidence index fell to 102.5 in October after hitting a five-month high of 107.8 in September, the Conference Board reported on Tuesday, missing economists’ estimate of 106.5. A value of 100 refers to 1985 levels.

“Consumer confidence fell in October after rising in August and September,” said Lynn Franco, the Conference Board’s senior director of economic indicators.

“Remarkably, concerns about inflation – which had been declining since July – increased again, with both gasoline and food prices being the main drivers,” she continued.

Consumers sent mixed messages about their purchasing goals as holiday plans waned but intent to buy homes, cars and expensive appliances increased.

“Looking ahead, inflationary pressures will continue to provide strong headwinds for consumer confidence and spending, which could result in a challenging holiday season for retailers,” Franco said. Should demand fall, retailers could find themselves under pressure on margins as they are forced to offer deep discounts on inventory already purchased.

The index’s two constituent metrics, the Current Situation Index and the Expectations Index, both deteriorated in October. The former, which tracks consumer perceptions of the current business and working environment, “fell sharply” by 11.3 points to 138.9, while the latter, which assesses consumers’ near-term prospects for income, businesses and working conditions, remained “bleak”. after falling to 78.1 from 79.5, Franco said.

A reading below 80 for the expectation index is associated with a recession, “suggesting recession risks are increasing,” she added.

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