Confidence surges near 17-year high
To harken back to Alan Greenspan, it may or may not be “irrational” – that probably depends on one’s perspective – but it certainly is “exuberance.”
It’s probably not a coincidence that the highest reading on consumer confidence since December 2000 comes at a time in which the nation’s labor market is strong, and unemployment has dropped to 4.2%, a level last achieved around that same time.
The Conference Board’s measure of consumer confidence rose more than expected in October to 125.9, easily besting expectations of 121.2 and surging above last month’s reading of 119.8.
Consumers hold a very upbeat view of the current state of the economy, but also are increasingly optimistic about what lies ahead. Why? In general, consumers believe that jobs are not hard to find and business conditions are generally positive. Both of those views are certainly understandable in light of recent economic data.
GDP rose by 3.0% again in the third quarter despite the negative disruption of Hurricanes Harvey and Irma on the economy of the impacted region. At the same time, while job creation stalled in September, layoffs and the jobless rate both remain exceptionally low.
All of this is happening despite a backdrop of a deeply divided Washington and little progress by the Trump Administration and Congressional Republicans in implementing the President’s economic policy agenda. The economy has surged anew despite that lack of tangible progress, and that improvement hasn’t been lost on consumers, who appear content to shrug off events inside the beltway.
With labor conditions continuing to tighten, stronger wage growth is still expected to develop, although gains have been surprisingly limited to this point. Nonetheless, an optimistic consumer sector emboldened by a solid economy and an increasingly competitive labor market are likely to continue to spend, reinforcing a virtuous cycle that should be supportive of further growth. Should wage growth also begin to show greater strength, it could be a source of further fuel for the consumer spending fire.
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