A decrease in consumer confidence is likely to lead to which economic condition?

A decrease in consumer confidence typically indicates that consumers are feeling less optimistic about their financial situation and the overall economy. This diminished confidence can lead to increased caution in spending behaviors. As consumers become more uncertain about their job security, income stability, and the economic outlook, they are likely to reduce their discretionary spending.

When consumer spending decreases, businesses may respond by scaling back on their investments in expansion or new projects, leading to a phenomenon of lower investments. Companies often make capital expenditure decisions based on anticipated consumer demand; if consumers are not confident in the economic environment, businesses may hold off on investing in new equipment or infrastructure, or hiring additional staff.

Thus, the economic condition that typically follows a decrease in consumer confidence is indeed lower investments, as businesses align their strategies with the cautious spending patterns of consumers.