Consumers are increasingly optimistic about the US economy |  CNN Business

Consumers are increasingly optimistic about the US economy | CNN Business


Consumer confidence rose for a second consecutive month in September, as moderation in gasoline prices and hope that inflationary pressures may ease helped boost the collective morale of the nation.

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

The monthly survey found that Americans feel less pessimistic both in their assessment of current conditions and in 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.

This reading is welcome news, as consumer outlooks have recently been rocked by growing fears of an economic slowdown. Last Thursday, the Conference Board announced that its leading economic index notched its sixth consecutive decline, which the organization’s chief economics director said “potentially signals a recession.” The index provides visibility across a range of economic activities, from jobs to manufacturing to markets.

The consumer confidence index is just a constellation of data points that economists and investors will have to digest this week. The Bureau of Economic Analysis’ third and final look at second-quarter GDP will be released on Thursday. Barring an upward revision that reveals the economy has been expanding rather than contracting, U.S. economic activity will have fallen for two straight quarters, a commonly used—albeit unofficial—criteria to indicate that the country is in a situation recession.

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

“Looking ahead, improving confidence may bode well for consumer spending in the final months of 2022, but inflation and interest rate hikes remain powerful headwinds to growth. short-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 attributed to lower gasoline prices and continued strong demand for workers. “We’ve been seeing lower gasoline prices for some time…and we have a pretty robust labor market,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“We were surprised at how well consumer confidence correlates with energy and fuel costs,” said Keith Buchanan, portfolio manager at Globalt Investments. “It helps people feel better when the weekly stop at the gas pump costs 30% less than three months ago.”

Although the national average price of a gallon of gasoline recently reversed course, breaking a 99-day streak of falling prices, it remains well below June’s record high of $5.02.

The Conference Board found that a greater percentage of respondents in September than in August said jobs were ‘plentiful’, while a slightly lower proportion described jobs as ‘hard to get’. The survey found that home purchase intentions were down, while car and appliance purchase intentions were up.

“It seems consumers aren’t too worried,” said Melissa Brown, global head of applied research at Qontigo. “It suggests an economy that can continue to grow, but I think the specter of inflation is there and it kind of looms over more good news.”

The Conference Board found that 12-month average 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 start of the year,” Franco said.

However, even with this improvement, it still suggests that Americans expect inflation to stay higher for longer. In the Federal Reserve’s summary of economic projections released last week, officials’ expectations for headline PCE inflation in 2023 fell to a range between 2.4% and 4.1%. That’s down from the current reading of 6.3%.

“We see interest rates needing to be kept higher for longer,” said Brian Mulberry, client portfolio manager at Zacks Investment Management. “You see that reflected in the price volatility in the market right now…People are really trying to figure out what the reality is.”

“Are there many questions about the impact of this inflationary environment on consumer behavior?” Buchanan said.

He added that the Fed’s hope for a soft landing rests on how U.S. households react to the effects of tighter monetary policy and their ability to handle higher prices and higher borrowing costs. students.

“How difficult this landing will be depends very, very heavily on how resilient and resilient consumer spending and behavior is over the next 12 months,” he said.

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