Boosted by rising wages and falling gas prices, US consumers were much more upbeat about the state of the American economy now and in the months ahead, according to a closely-watched survey released Tuesday.
The consumer confidence index jumped nearly five points to 108.0 the second straight monthly gain, according to The Conference Board. The result was the highest level since April and far better than the modest improvement economists had expected.
The US Federal Reserve has been raising borrowing costs aggressively this year, and last week announced its third consecutive, 0.75 percentage point increase in the benchmark interest rate as it tries to cool the world’s largest economy to bring down the fastest inflation in 40 years.
So far progress has been slow, as resilient consumers, flush with savings have continued to spend, supporting economic activity. But the survey showed expectations about inflation fell for third straight month, which is good news for the central bank.
“Concerns about inflation dissipated further in September — prompted largely by declining prices at the gas pump — and are now at their lowest level since the start of the year,” said Lynn Franco, senior director of economic indicators at The Conference Board.
Buoyed by a strong job market, respondents felt better about their present situation as well as expectations for the coming six months, the survey showed, but Franco cautioned that “recession risks nonetheless persist.”
Intentions to make big-ticket purchases were mixed, with plans to buy cars and appliances increasing, but more reluctance to invest in a home, which Franco said reflected rising mortgage rates and the cooling housing market.
“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,” Franco said in a statement.
Ian Shepherdson of Pantheon Macroeconomics cautioned that the good feelings “might not last as people absorb the hit from the recent drop in stock prices and the Fed’s latest rate hikes, with the promise of more to come.”
“For now, though, people’s views of both the current and future economy have perked up, and the headline index is now just a few points shy of the pre-Ukraine invasion peak,” he said.
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