US Consumer Confidence Rises to 9-Month High in October

In October, the consumer confidence index in the United States soared to its highest level in nine months. This boost is attributed to the increased optimism in the labor market and Americans’ more positive outlook on the economic direction in the months following the presidential election.

The Consumer Confidence Index of the Conference Board in the U.S. rose from 99.2 in September to 108.7 in October, marking the largest single-month increase since March 2021.

In October, consumers’ assessment of the business environment turned positive, with a higher percentage of respondents expressing optimism compared to September.

The evaluation of family financial conditions remained relatively unchanged, with a higher proportion of respondents considering them “good” rather than “poor,” similar to the proportions in the past few months.

After experiencing a decline for several months, consumers’ perceptions of the labor market also improved. More consumers indicated that job opportunities were “plentiful,” while those stating job opportunities were “hard to get” decreased.

On October 4th, the Bureau of Labor Statistics in the U.S. released the latest government employment report, which was also the final report before the presidential election. The report revealed that nonfarm payroll employment increased by 254,000 in September, far exceeding the market’s expected 140,000 new positions and surpassing the average monthly increase of 203,000 over the previous 12 months.

Dana Peterson, Chief Economist at the Conference Board, stated in a release, “After months of sluggishness, consumers’ perception of current job prospects has improved, which may reflect the positive changes in labor market data.”

In addition to boosting consumer confidence, this employment report also appeared to alleviate concerns about an economic downturn. Peterson noted, “The proportion of consumers expecting an economic recession in the next 12 months declined to the lowest level since it was first raised in July 2022, and those believing the economy is in a recession also dropped to a minimum.”

The report from the Conference Board revealed a significant decline in concerns about an economic recession in October, with the likelihood of economic contraction in the next year reaching historically low levels.

Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, stated that these data should help dispel concerns about the economy “teetering on the edge of collapse or heading towards doomsday.”

Moreover, forward-looking assessments have generally improved. The index measuring consumers’ short-term outlook on income, business, and labor market prospects surged to 89.1 in October, exceeding the critical value of 80 that typically signals an economic recession.

Consumers’ willingness to purchase homes and new cars increased, along with plans for dining out, staying at hotels, and engaging in entertainment activities.

Peterson commented, “Compared to the previous month, consumers are more optimistic about the future business environment and maintain a positive outlook on future income. Additionally, for the first time since July 2023, they are showing a cautiously optimistic attitude towards future job opportunities.”

However, despite the increased optimism among consumers regarding job prospects, a government report released on Tuesday, October 29th, indicated that more employers have put recruitment plans on hold while workers are holding onto their current positions.

According to the Job Openings and Labor Turnover Survey (JOLTS) report from the Bureau of Labor Statistics, the number of job openings decreased by 418,000 in September, dropping to 7.44 million, the lowest level since January 2021. At the same time, the number of employees voluntarily quitting their jobs reached the lowest level since August 2020, indicating a decline in workers’ confidence in finding better employment opportunities.

Nevertheless, consumers remain concerned about inflation. The report from the Conference Board pointed out that in written responses in October, most people still mentioned high prices and inflation.

Although the inflation rate has significantly slowed down from its peak of 9% in June 2022, consumers’ expectations for inflation in the next year have increased from 5.2% last month to 5.3%.

In September, the Federal Reserve Board lowered interest rates by 50 basis points, citing a decrease in the inflation rate and increasing risks of high interest rates damaging the economy. Some business leaders expressed concerns about lingering inflationary pressures or their potential resurgence.

On Tuesday, October 29th, Ted Pick, Chief Executive Officer of Morgan Stanley, at a financial CEO roundtable in Riyadh, Saudi Arabia, stated that the era of near-zero interest rates and ultra-low inflation “has ended” and predicted that the central bank would maintain rates at levels higher than expected.

Larry Fink, CEO of BlackRock, expressed similar views at the same event. He believes that embedded inflation levels are higher than ever, with government policies fueling inflation.

Fink said, “I believe government policies have now created embedded inflation, so rates won’t be as low as people predicted.”

The outlook for post-election inflation remains unclear. Both former President Trump and Vice President Kamala Harris have expressed support for policies that promote economic growth, while some economists believe these policies could exacerbate inflation.