An early read on consumer confidence showed a clear improvement in the mood of shoppers for October, according to the University of Michigan’s preliminary consumer sentiment index.
The index jumped to a reading of 92.1, which is the first gain in the past four months. September’s reading was 87.2. The index is closely watched by the Federal Reserve’s open markets committee as a key metric in determining policies on interest rates. Inflation, consumer spending and producer prices are also considered.
Richard Curtin, chief economist and director of the Michigan Survey of Consumers, said the “rebound in confidence signifies that consumers have concluded that the fears expressed on Wall Street did not extend to Main Street.”
This past summer, economists and analysts blamed the “headline effect” of Greek debt woes and a market crash in China for eroding consumer confidence, which appeared to weaken retail sales in August. The eroded confidence paralleled several stock market volatility indexes, which had shown gains of 20 to 30 percent. Most stock market volatility indices — including the CBOE Volatility Index — have since recovered close to pre-August levels.
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“Importantly, the renewed confidence did not simply represent a relief rally, but instead reflected renewed optimism,” Curtin explained in the report. “Personal financial expectations rose to their highest level since 2007, as did consumers’ views toward purchases of durable goods.”
The rise in confidence also carried a bit of caution and concern. “While consumers anticipate a continued economic expansion, many [expect] strong headwinds from falling commodity prices, weakened economies in China and elsewhere as well as continued stresses on European countries,” Curtin said.
The chief economist said the survey showed that current conditions have “enabled consumers to adapt to a slower and more variable rate of economic growth by varying the pace of their spending without losing confidence that the expansion will continue.”
Curtin said he expects consumer spending to” expand at 2.9 percent during 2016.”