Consumer confidence in the US fell in October after two months of gains, The Confidence Board reported today.

Its Consumer Confidence Index now stands at 102.5 (1985=100), down from 107.8 in September.

In addition, the Present Situation Index — based on consumers’ assessment of current business and labor market conditions — declined to 138.9 in October from 150.2 in September.

The Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — also declined to 78.1 from 79.5 reported in September.

“Consumer confidence retreated in October after advancing in August and September,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The Present Situation Index fell sharply, suggesting economic growth slowed to start Q4. Consumers’ expectations regarding the short-term outlook remained dismal. The Expectations Index is still lingering below a reading of 80 — a level associated with a recession — suggesting recession risks appear to be rising.”

Franco said concerns about inflation, which had been receding since July, picked up again, with gas and food prices as the main drivers.

“Vacation intentions cooled; however, intentions to purchase homes, automobiles and big-ticket appliances all rose,” Franco said. “Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers. And, given inventories are already in place, if demand falls short, it may result in steep discounting, which would reduce retailers’ profit margins.”

Appraisal of the labor market declined as 45.2% of consumers said jobs were plentiful, down from 49.2% in September. However, 12.7% of consumers said jobs were hard to get, up from 11.1%.

In terms of the short-term labor market outlook, consumers were conflicted. While 19.8% expect more jobs to be available, up from 17.4% in September, 20.8% anticipate fewer jobs, up from 17.8%.

Consumers’ assessment of current business conditions was less favorable in October, according to the index. In addition, 17.5% of consumers said that business conditions were good, down from 20.7%, while 24.0% said business conditions were bad, up from 20.9% in September.

Consumers were mixed about the short-term business conditions outlook; 19.2% expect business conditions to improve, up from 18.6%, while 3.3% expect business conditions to worsen, up from 21.9% in September.

According to the index, consumers have mixed feelings about their short-term financial prospects. While 18.9% expect their incomes to increase, up from 18.3%, 15.1% expect their incomes will decrease, up from 13.8% in September.