US Consumer Confidence Rebounds; spending plans go up strongly

US consumer confidence rose unexpectedly in October as concerns over high inflation were offset by better prospects for the working market, suggesting a rebound in economic growth after a turbulent third quarter.

Tuesday’s Conference Board poll showed great interest in buying homes and expensive items like motor vehicles and appliances in the next six months. The proportion of Americans planning to go on vacation is the highest since February 2020, just before the nation was hit by the first wave of the COVID-19.

Coronavirus infections in the boreal summer, driven by the delta variant, and the limitations of the supply chain related to the pandemic restricted economic activity last quarter.

“Consumers are more optimistic after a difficult third quarter and that calls for a strong end to the economy in 2021,” said Christopher Rupkey, economist at FWDBONDS. “Consumers know that the tight job market supports them. Those who foresee a recession due to the fall in confidence at the end of the (boreal) summer will have to back down ”.

The Conference Board said its consumer confidence index rose to 113.8 this month from 109.8 in September, ending three consecutive monthly declines.

The measure, which puts more emphasis on the labor market, remains below its peak of 128.9 in June. The rise contrasts with the University of Michigan consumer survey, which showed confidence slumped earlier this month.

Economists polled by Reuters had predicted that the index would drop to 108.3. The Conference Board’s so-called labor market differential, derived from data on respondents’ opinions about whether jobs are plentiful or hard to come by, advanced to a reading of 45 this month, the highest in 21 years, from 43.5. in September.

Consumer inflation expectations for the next 12 months jumped to 7%, a 13-year high, from 6.5% last month. Despite perceptions of high inflation, there were plans to raise spending, with motor vehicle purchase intentions picking up from a nine-month low.

In addition, more people were planning to buy appliances like washing machines, televisions and refrigerators over the next six months, suggesting that spending would regain strength after an apparent sharp slowdown last quarter.

Consumer spending this quarter is also likely to be driven by higher demand for travel. The percentage of consumers who say they plan to take a vacation in the next six months increased to 47.6%. That was the highest number since the pandemic began and increased from 42.3% in September.

“Buyer fatigue”

There was also good news in the housing market. A Commerce Department report on Tuesday showed sales of new single-family homes rose 14% to a seasonally adjusted annual rate of 800,000 units in September, the highest level in six months.

The Conference Board survey showed that consumers are more inclined to buy a home in the next six months. The housing market could be driven by a moderation in housing price inflation.

A third report released Tuesday showed the S&P CoreLogic Case-Shiller national home price index rose 19.8% in August from a year earlier after a similar gain in July. Its home price index for 20 metropolitan areas rose 19.7% year-on-year after a record high of 20% in July.

Signs that home price increases have peaked were evident in a fourth report from the Federal Housing Finance Agency that showed that home prices rose 18.5% in the 12 months through August after go up a record 19.2% in July.

“The slowdown in home prices suggests that buyer fatigue is taking hold, particularly among higher-priced homes, where the acceleration in price growth from the previous month has been greater compared to lower-priced homes. level, ”said Selma Hepp, CoreLogic Deputy Chief Economist.