United States: Consumer confidence trends higher in August
August 29, 2017
The Conference Board’s consumer confidence index rose from a revised 120.0 points in July (previously reported: 121.1 points) to 122.9 points in August, marking the second-best reading since December 2000 and the strongest since March’s 124.9-point high. The print also surprised market analysts, who had expected a smaller pick-up of 120.6 points.
The index remains firmly above the 100-point threshold that separates optimism from pessimism among consumers, who seem to have brushed off fears over mounting tensions with North Korea. However, the report is unlikely to fully reflect the political noise that followed Donald Trump’s response to the rioting in Virginia in mid-August, since the cutoff date for the preliminary results was 16 August.
August’s headline figure showcased consumers’ more upbeat assessment of current conditions and the labor market. Regarding the latter, 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—continued to widen in August, reaching its highest value since August 2001. Healthy payroll growth and the downtrend in the unemployment rate seen in recent months have lowered the number of respondents who note that jobs are hard to get, which points to better times ahead for job seekers.
On the expectations side, results were mixed. The most optimistic outcome came from income expectations, which improved significantly in August. Consumers’ prospects regarding business conditions were largely unchanged, while job prospects deteriorated as a whole, as the proportion of consumers expecting more jobs declined at a faster pace than the percentage who expected fewer job opportunities.
The August report reinforced the idea that survey-based data continues to trend higher even as expectations of a fiscal stimulus plan are being scaled down. This largely stems from the strength of the labor market and subdued inflation, which is fueling robust disposable income growth for U.S. households. All in all, this report points to a strong second half of the year for consumer spending, which should shore up overall economic growth even in the absence of growth-inducing policies from Washington.
Author: David Ampudia, Economist