While business economists may have become slightly less optimistic, consumers turned a bit more bullish in October. The Conference Board Consumer Confidence Index reported an uptick in optimism.
The Conference Board Consumer Confidence Index® increased in October, following declines in the previous three months. The Index now stands at 113.8 (1985=100), up from 109.8 in September. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—rose to 147.4 from 144.3 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—improved to 91.3 from 86.7.
“Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”
As the chart above shows, confidence remains below pre-pandemic peak. Part of the explanation for the upturn appears to be an improved labor market, which we hope translates to more people returning to the workforce.
Consumers were more optimistic about the short-term labor market outlook.
- 25.4% of consumers expect more jobs to be available in the months ahead, up from 21.3%.
- 18.3% anticipate fewer jobs, down from 19.9%.
Consumers were more positive about their short-term financial prospects.
- 18.7% of consumers expect their incomes to increase, up from 16.9%.
- 11.3% expect their incomes will decrease, virtually unchanged from 11.4%.
The Associated Press reports,
Consumer spending makes up about 70% of all economic activity in the U.S., so economists pay close attention to the numbers for a better idea of what’s to come for the national economy.
Consumers’ view about both the present situation and future expectations both rebounded in October.
In addition to the delta variant, consumer concerns about inflation had dragged confidence lower. Earlier this month, the Labor Department reported another jump in consumer prices in September that sent inflation up 5.4% from where it was a year ago. That matched the largest increase since 2008 as snarled global supply chains continue to create havoc.
The October increase in consumer confidence surprised analysts, who broadly expected a fourth straight decline.
We were surprised, too.