United States: Consumer confidence continues rising, nears an all-time high in September
September 25, 2018
Consumer confidence again surged to new highs in September, following a similarly large jump recorded in the previous month. The Conference Board’s monthly consumer confidence index soared from August’s upwardly revised 134.7 (previously reported: 133.4) to 138.4, the highest print since September 2000. The figure defied the expectations of market analysts, who had seen the index moderating to 131.7. The index thus remains well above the 100-point threshold that separates consumer optimism from pessimism and nears the all-time record of 144.7 registered in January and May 2000.
The uptick in consumer sentiment in September was largely driven by an improvement in consumers’ confidence in the near-term economic outlook, while their perception of current conditions remained broadly stable. This evolution is particularly interesting as the economic news cycle in the month has been dominated by the Trump administration’s decision to dramatically escalate its trade war with China, levying ten percent tariffs on USD 200 billion of goods. Thus, the September confidence index signals that American consumers have so far been unfazed by the prospects of price increases on consumer goods, which will be much-welcomed news for U.S. retailers heading into the holiday season. It should however be noted that the survey only took into account responses submitted until September 18, just a day after president’s Trump official tariff announcement. Thus, it is likely that the impact of new tariffs on consumer sentiment will only start to be reflected by the survey data in the following months.
Consumer’s perceptions of current economic conditions remained extremely positive in September, with the proportion of respondents saying business conditions are “good” increasing somewhat. Although the labor differential—the difference between the percentage of respondents who state that jobs are plentiful and those who say that jobs are hard to get—increased from 30.2 in August to a solid 32.5 in September, the proportion of pessimistic respondents also increased noticeably, an unusual sign in an historically strong labor market.
Regarding consumers’ assessment of the economic outlook in the next six months, both their perceptions of business conditions and the labor market outlook improved markedly. For each indicator, the share of optimistic respondents increased significantly while the share of pessimistic respondents declined. Interestingly, however, the proportion of consumers expecting their own income prospects to improve over the next six months declined significantly, which is somewhat at odds with the rest of the survey data and constitutes the main negative point of September’s reading. Nevertheless, the data overall points to a very robust momentum in consumer spending which should continue to buttress economic growth until at least the end of the year.
Author: Joffrey Simonet, Economist