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February 27, 2018 Blog 1 min read
Consumer Confidence surges in February to its highest point since 2000.

line graph showing the consumer confidence index - history 

“To say that consumers are upbeat at this point doesn’t do it justice; they are exceptionally optimistic.”

 

The Conference Board’s measure of consumer confidence rose again in February, as the index surged to 130.08, easily besting expectations for an increase to 126.4.

 

By this measure at least, the consumer sector hasn’t been this optimistic since November 2000 – over 17 years ago.  And it’s not just that they feel good about the current state of the economy; there is a genuine and growing optimism about the future outlook as well.

 

Strong labor market conditions and better wage growth may be the key prop under consumer finances, but the increase in take-home pay as a result of the recently implemented tax cuts is also likely playing a role.

Regarding recent stock market volatility, it appears that consumers took that in stride. While it isn’t directly addressed in the survey, market volatility can taint consumers’ view on the broad economy. A brief bout of volatility isn’t likely to impact spending or that outlook though; that would likely take a more extended period of market turbulence to have an impact.

 

Consumer confidence turned sharply higher in the aftermath of the 2016 election and has gradually improved in the past year, despite the deeply partisan rancor in Washington and sharply divided views on President Trump and his performance.  Despite that, the fact that the economy has picked up steam since early 2017 hasn’t been overlooked by consumers, and the likelihood that tax cuts will provide an additional near-term boost should also be supportive of the consumer mood.

 

The combination of a very positive consumer outlook, stronger wage growth, and an additional boost to household budgets provided by lower federal tax withholding should work in concert to support continued growth in consumer spending.

 

Moreover, a combination of solid consumer spending and increased business investment should provide a strong foundation for continued growth in the U.S. economy in the near term.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

 

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Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.