Consumers are growing more optimistic about the US economy

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CNN

Consumer confidence rose for the second month in a row in September, as moderating gas prices and hoping that inflationary pressures could ease helped improve the collective mood of the nation.

The Conference Board reported Tuesday that the baseline index rose to 108 from a revised 103.6 in August, the highest since April.

The monthly survey found that Americans are less pessimistic in both their assessment of current conditions and their outlook for the future. The current Situation Index portion of the survey rose from 145.3 to 149.6. The Expectations Index, which is based on the short-term economic outlook, rose from 75.8 to 80.3.

The reading is welcome news, as consumer prospects have been plagued lately by growing fears of an economic downturn. Last Thursday, the Conference Board said its Leading Economic Index: notched the sixth consecutive decline, which the organization’s senior director of economics said “may indicate a recession.” The index provides insight into a range of economic activities ranging from jobs to manufacturing to markets.

The Consumer Confidence Index is just one constellation of data points that economists and investors will have to digest this week. The Bureau of Economic Analysis’s third and final look at Q2 GDP will be released on Thursday. Barring an upward revision that expands rather than shrinks the economy, US economic activity will have declined for two consecutive quarters, a widely used — though unofficial — measure of the country’s recession.

On Friday, the BEA will also release its Personal Consumption Expenditures Index, the Federal Reserve’s preferred inflation benchmark. and the University of Michigan will report on consumer confidence.

“Looking ahead, improving confidence may bode well for consumer spending in the final months of 2022, but inflation and interest rate hikes remain strong headwinds for growth in the near term,” Lynn Franco, senior director of economic indicators at The Conference Board, said. in a statement.

Analysts said much of September’s improvement could be due to lower gas prices and continued high demand for workers. “We’ve been seeing declining gasoline prices for a while… and we have a pretty robust job market,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“We are surprised at how strongly consumer confidence is correlated with energy and fuel costs,” said Keith Buchanan, portfolio manager at Globalt Investments. “People feel better when the weekly stop at the gas station costs 30% less than three months ago.”

While the national average price of a gallon of gas recently changed course and broke a 99-day streak of falling prices, it remains well below the June all-time high of $5.02.

The Conference Board found that a higher percentage of those surveyed in September than in August said jobs were “abundant,” while a slightly smaller proportion characterized jobs as “hard to get.” The survey found that buying intentions for a home decreased, while buying intentions for cars and appliances increased.

“It doesn’t seem like consumers are too concerned,” said Melissa Brown, global head of Applied Research at Qontigo. “It suggests an economy that can continue to grow, but I think that specter of inflation is there and kind of hanging over other good news.”

The Conference Board found that average 12-month inflation expectations fell to 6.8% in September, from 7% in August. “Inflation concerns eased further in September… and are now at their lowest level since the beginning of the year,” Franco said.

But even with this improvement, it still suggests Americans expect inflation to stay high for longer. In the summary of the Federal Reserve’s economic projections released last week, officials’ expectations for aggregate PCE inflation in 2023 fell to a range between 2.4% and 4.1%. That is less than the current level of 6.3%.

“We are seeing the realization that interest rates will have to be kept high for longer,” Brian Mulberry, client portfolio manager at Zacks Investment Management. “You see that reflected in the price volatility in the market now… People are really trying to get a handle on what the reality is.”

“There are a lot of questions about: what is this inflationary environment doing to consumer behavior?” said Buchanan.

He added that the Fed’s hopes for a soft landing rest on how US households are responding to the effects of tighter monetary policy, and how well they can manage high prices and higher borrowing costs.

“How difficult that landing will be will depend very, very much on how sticky and resilient consumer spending and behavior become over the next 12 months,” he said.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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