Rising interest rates, turbulent stock markets and a trade war don’t appear to be denting Americans’ confidence in the economy.
Consumer confidence, as measured by the Conference Board, jumped again in October to 137.9, up from 135.3 in September and marking the highest rate in 18 years.
This is likely to continue, according to Lynn Franco, senior director of economic indicators at The Conference Board, who stated that another gain suggests that consumers “do not foresee the economy losing steam anytime soon and that they expect the strong pace of growth to carry over into early 2019.”
She added that a strong jobs market where unemployment is at the lowest level in almost half a century and vacancies top 7 million is helping to boost confidence levels.
Indeed, the index found that those claiming jobs are “plentiful” increased from 44.1 percent to 45.9 percent, while those who believe jobs are “hard to get” decreased from 14.1 percent to 13.2 percent.
And while the proportion expecting more jobs in the months ahead fell slightly from 22.1 percent to 21.9 percent, those anticipating fewer jobs also slid, from 11.4 percent to 10.5 percent.
“In sum, households are feeling pretty good about things, at least up until the market volatility in recent days,” Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a note to clients. “Thus, while market participants seem to be extremely eager to call for a recession, consumers have a brighter view of the landscape.”
Strong consumer confidence has been translating into higher spending. Official data out Friday showed that consumer spending was much better than expected, jumping 4 percent, up from 3.8 percent in the previous quarter and helping GDP grow by 3.5 percent between July and September. While the GDP rate wasn’t as strong as the 4.2 percent growth witnessed in the second quarter, it’s still impressive by historical standards.
Some are concerned that this may not last as the Federal Reserve continues to lift rates, pushing up a raft of consumer borrowing costs, while the worsening trade war between the U.S. and China will likely result in higher prices for consumers.
Michael Pearce, senior U.S. economist at Capital Economics, said: “The survey provides further reason to think that, with labor market conditions strong and wage growth picking up, consumption growth will be solid over the coming months. But we suspect that as interest rates rise even further, spending growth in the most rate-sensitive areas will come under pressure, causing economic growth to slow sharply next year.”