What effect does reduced consumer confidence typically have?

Reduced consumer confidence typically leads to a reduction in spending and potential economic slowdown because when consumers feel uncertain about their financial future, they are less likely to make significant purchases or investments. This hesitation often results in decreased demand for goods and services, which can cause businesses to scale back production and potentially lay off workers. The reduced level of consumer spending can slow down economic growth since consumer expenditure is a major component of national income. As confidence remains low, businesses might also reduce their investments and hiring, which further compounds the economic slowdown. Therefore, the connection between consumer confidence and spending patterns highlights why a decrease in consumer confidence results in less spending and the possibility of economic stagnation or decline.