American consumer confidence climbed to 91.7 in October, sharply exceeding forecasts as households expressed greater optimism about current business conditions, employment opportunities and their financial prospects despite continued concerns about inflation.
By yourNEWS Media Newsroom
U.S. consumer confidence rebounded sharply in October, rising 7.5 points to 91.7 as Americans reported improving business conditions and a more favorable employment outlook, according to figures released Tuesday by The Conference Board.
The increase from September’s upwardly revised reading of 84.2 substantially exceeded economists’ expectations of a decline to 81. The October recovery returned confidence to levels last recorded in June, partially reversing three consecutive months of deteriorating sentiment.
The Conference Board’s Oct. 27 Consumer Confidence Survey showed improvement in both major components of the index.
The Present Situation Index, measuring consumers’ assessments of current business and labor market conditions, rose 8.6 points to 120.4. The Expectations Index, reflecting the outlook for income, employment and business conditions over the next six months, increased 6.9 points to 72.6.
“Consumer confidence advanced in October, driven primarily by improved perceptions of current and expected business conditions,” said Fergus McCormick, senior economist for global indicators at The Conference Board. “The recovery was in line with retail gasoline prices easing from September to October.”
Despite the improvement, McCormick cautioned that consumer sentiment remains weak compared with historical trends, reflecting continued financial pressures from elevated prices.
The survey found that 21.4% of respondents described current business conditions as good, up from 18.8% in September. Meanwhile, the share describing conditions as bad declined to 17.8% from 20%.
That improvement marked a return to a positive assessment of current business conditions after September’s deterioration.
Consumers also expressed greater confidence in the labor market.
The proportion saying jobs were plentiful increased to 26.7%, compared with 24.3% the previous month. The share describing jobs as hard to obtain remained unchanged at 21.4%.
The difference between those two measurements, closely watched as an indicator of labor market sentiment, widened by 2.4 percentage points to 5.3%.
Expectations for the coming six months also improved, although consumers remained more pessimistic than optimistic about future business and employment conditions.
The share expecting business conditions to improve increased to 17.7% from 16.5%, while the percentage anticipating worsening conditions fell to 20.7% from 25.2%.
Similarly, 15.2% expected more jobs to become available, compared with 14.7% in September. Those expecting fewer jobs declined to 26.3% from 27.6%.
Household income expectations strengthened as well. The share anticipating higher income increased to 18.7%, while the proportion expecting an income decline dropped to 12% from 14.9%.
The improved outlook comes as falling gasoline prices provide some relief to consumers following September’s increase in fuel costs.
However, inflation remains a major concern.
McCormick said respondents continued expressing frustration about the cost of groceries, food and energy, particularly oil and diesel.
“Among write-in responses in October, consumers continued to express frustration with rising costs,” he said. “References to prices, the high cost of food and groceries, and oil and diesel prices rose.”
Consumers’ average inflation expectations over the next 12 months declined but remained elevated at 5.8%.
The survey also found that more respondents expected interest rates to rise over the coming year, while expectations for stock market performance remained generally positive.
Despite improving economic sentiment, consumers reported plans to reduce spending on several categories of goods and services.
Expected purchases of durable goods declined, including planned spending on smartphones, computers, laptops and tablets.
Consumers also indicated less enthusiasm for purchasing automobiles and homes, with both categories declining slightly on a six-month moving-average basis.
Spending expectations for services weakened across most categories, although planned expenditures on entertainment, including movies, theater and sporting events, increased.
Vacation plans also softened, with 43.3% of consumers expecting to take a trip during the next six months, down from a revised 44.2% in September.
The findings suggest that Americans are becoming more optimistic about economic conditions without necessarily planning significant increases in discretionary spending.
Confidence improved across political affiliations, although the increase was substantially greater among Republicans, according to The Conference Board.
Over a six-month period, consumers younger than 35 and households earning at least $100,000 were the only demographic groups showing an upward confidence trend.
Older generations, including Generation X, baby boomers and the Silent Generation, continued reporting lower confidence than younger consumers.
The survey also found that respondents felt better about their current family finances following two months of weakness. However, when asked about the likelihood of a recession during the next year, the most common response remained that one was somewhat likely.
The October findings arrive as the Federal Reserve begins its two-day monetary policy meeting, during which officials are considering how to balance inflation concerns against signs of slowing employment growth.
Higher interest rates can help contain inflation but also increase borrowing costs for consumers and businesses.
Although consumer confidence does not directly determine Federal Reserve policy, the survey provides insight into household expectations that can influence spending and broader economic activity.
The Conference Board conducted its October survey through Toluna, using an online sample collected from Oct. 1 through Oct. 21.
The index measures consumer attitudes toward current economic conditions and expectations for the next six months, with 1985 serving as the benchmark value of 100.
October’s unexpectedly strong reading indicates that American households are responding positively to improved business conditions and some relief in gasoline prices.
However, continued concerns about inflation, weaker spending intentions and lingering pessimism about future employment suggest the recovery in confidence remains incomplete.
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