Consumer optimism soared in February, sharply reversing three months of decline. The Conference Board Consumer Confidence Index rebounded to 131.4 in February – up notably from 121.7 in the prior month. That unexpectedly positive result easily beat expectations of 124.9 and halted a slide that dated back to November.
Among survey participants, the aggregate view on the current state of the economy edged higher, but much more telling was the improvement in consumers’ outlook on future conditions.
Generally, consumers have been upbeat for some time on the current state of business conditions and labor markets – understandable given the strength of the economy, the pace of job creation, and low unemployment in recent years.
In recent months, however, a combination of factors had weighed on the collective mood. The stock market swoon late last year certainly didn’t help, but its sharp rebound since the last week in December has been a relief for investors. Ongoing tensions around global trade, particularly with China, have also contributed to that unease.
Perhaps most notable in recent months was the stalemate over President Trump’s border wall and immigration policy that resulted in the extended government shutdown. The polarization in Washington clearly weighed on sentiment, and its subsequent resolution has now alleviated a significant concern. Indications that the Fed may move more slowly than previously expected to raise interest rates has also been well received.
The result? Despite a bumpy equity market ride, signs of a slowdown in growth, and lingering policy uncertainty on multiple fronts, consumers still feel pretty good about the current state of the economy. That bodes well for consumer spending in the coming months, which should provide a key support for the economy as a whole. For now at least, the virtuous cycle still appears to be intact.
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