Consumer Confidence Rises in Spite of Challenged Conditions
Americans are surprisingly optimistic about the state of the economy.
Recent economic headlines are enough to make Eeyores out of all of us. Yesterday the Dow Jones Industrial Average followed the S&P 500 into official bear market territory. The Fed’s own leadership is concerned the central bank may be overzealous in all its rate-hiking fervor. And In the UK, large banks have yanked mortgage deals out from under prospective homebuyers.
But new data suggests no amount of dour news can harsh the positive vibes of well-footed American consumers. They’re not just smiling through adversity. They’re actually upbeat.
Let the Good Times Roll
On the back of falling gas prices and a still strong job market, US consumer confidence rose for a second month in September to the highest since April. The Conference Board’s index increased to 108 from a 103.6 reading in August, easily eclipsing the median forecast of 104.6.
So, what’s behind this stoic confidence?
- While they recently broke a 99-day streak of falling prices, gas is well below a record high of $5.02 notched in June. Meanwhile, an atypically high near-50% of consumers said jobs were “plentiful,” and survey respondents expected business conditions to be even better in six months — all those “Help Wanted” signs may guarantee the short-term pain of slower service at lunch or dinner, but they sure appear to inspire plenty of long-term confidence.
- Economists are optimistic that strong consumer confidence could be a tailwind in and of itself. The board wrote: “Looking ahead, the improvement in confidence may bode well for consumer spending in the final months of 2022, but inflation and interest-rate hikes remain strong headwinds to growth in the short term,” she said.
Capital Confidence: In yet another sign of sanguinity, new orders for US-manufactured capital goods saw some of their highest gains in the year so far last month, according to a Commerce Department report on Tuesday. Orders for non-defense goods, a key metric for business spending plans, saw the highest gain since January, signaling businesses are happy to invest in growth even as interest rates climb and inflation rages. The consumer confidence survey meanwhile showed an increase in Americans who plan to buy big-ticket items in the next six months. We’ll just chalk that up to Panglossian purchasing power.