After dropping unexpectedly last month, the Conference Board’s measure of consumer confidence stabilized in October, declining only modestly to 125.9 from 126.3 in the prior month. Continued strength in job market conditions has provided a solid footing under consumers, as both unemployment and layoffs remain near half-century lows.
In addition to the strong labor market, the announcement of a preliminary deal earlier this month likely provided some hope that progress was being made toward a resolution with China on trade. At the same time, the “on again, off again” flow to talks is likely to encourage a sense of skepticism until a deal is clearly more than just rumored.
Broadly, survey respondents were more positive on the current state of the economy, although their expectations for the future dimmed moderately. Despite that relatively optimistic mindset, it’s clear that consumers are aware of the number of unknowns that could complicate economic conditions in the months ahead.
Still, the news on the overall mood of the consumer is good…..and critically so. The importance of the consumer engine for the economy really can’t be overstated at this point, with exports and business investment still languishing. The economy might be effectively flying on one engine, but it’s a big one that can carry the load for some time, so long as consumers are willing to do so.
The first look at third quarter GDP growth and the October jobs report are just around the corner, and both have the potential to be impactful. Throw in the expectation of another rate cut from the Fed tomorrow (or for the central bank to disappoint), and there’s plenty for consumers and the markets to absorb in the coming days.
Households appear to still be well positioned to continue to spend in the months ahead. Will consumers like what they hear? That may determine their willingness to do so, which will be just as important as their ability.
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