Consumer confidence rebounds in October

Americans felt better about their finances and the economy in October, as The Conference Board’s Consumer Confidence Index recorded its strongest monthly gain since March 2021.

The index increased in October to 108.7 from a slightly revised 99.2 in September — and all five components of the index improved.

The Conference Board Senior Economist Stephanie Guichard said consumer confidence “rebounded quite substantially” this month, even though the score remained within a narrow range that has prevailed over the past two years.

Assessments of current business conditions turned positive, according to The Conference Board. Views on the current availability of jobs rebounded after several months of weakness. Consumers were more optimistic about future business conditions and folks remained positive about future income.

The rise in consumer confidence was also seen across age groups. The current confidence score of 108.7 is above the long-term average, Guichard said.

“I think they feel good about the economy, but not exceptionally good,” she described.

The nonpartisan, nonprofit think tank and business membership organization has been measuring consumer confidence since 1967.

The index reading was above 100 from the summer of 2016 until the spring of 2020. The index, which got as high as 137.9 in the last decade, got as low as around 86 early in the pandemic. The Expectations Index from the group has risen clearly above the threshold that signals a recession risk.

Guichard said people are “extremely upbeat about the stock market,” with the highest share of survey respondents expecting stock prices to increase since the group started asking that question in 1987.

Inflation expectations remained well above actual inflation levels, though Guichard said people in the surveys are starting to see that inflation is cooling.

The economy is a top issue in the minds of voters during this election, and inflation is their top economic concern, according to recent surveys from Gallup and Bankrate.

Despite a pretty rosy consumer confidence report Tuesday, one political expert said he doesn’t see any impact on the election.

Todd Belt, the political management program director at George Washington University, said political scientists trying to forecast elections look at economic growth, consumer confidence, unemployment and inflation.

“So, those are really the four key metrics for the economy as to how they affect elections,” Belt said. “This election has been dominated by inflation. Even though it’s down to 2.4%, it’s still on everybody’s minds.”

The economy is in pretty good shape, but inflation has been a sticky issue.

Belt said Americans form very partisan views of the economy, and he doesn’t see recent optimism swinging many voters at this point in the race.

Guichard said Americans aren’t talking about the election as much this year in their consumer confidence surveys.

Based on write-in concerns in The Conference Board’s surveys, the election fell below prices, inflation, food and groceries.

“Election” was the most mentioned keyword in the write-in responses before the 2016 election and No. 2 — behind COVID — in 2020.

Guichard said much of the increase they saw this month in consumer confidence had to do with an improved outlook for the jobs market.

A new JOLTS — Job Openings and Labor Turnover Survey — report was released Tuesday. The layoff rate ticked up to 1.2% from 1% the month before and 1% a year ago. But it remains low.

Bankrate Senior Economic Analyst Mark Hamrick said via email that September job openings are down 1.9 million from a year earlier, which translates to 1.1 jobs open for every unemployed individual. And Hamrick said we remain on track for more interest rate cuts.

The Federal Reserve ratcheted up its benchmark interest rate 11 times between 2022 and 2023 as a lever to tame inflation.

The Fed finally reversed course last month, cutting half a percentage point off its benchmark interest rate as inflation continued to cool and worries over the labor market increased.

“For now, the most likely path appears to involve a rate cut of one-quarter of 1% with the announcement due Nov. 7,” Hamrick said. “The same expectation holds, at least for now, for the Dec. 18th (Federal Open Market Committee) announcement.”

Another jobs report is due out Friday. That report last month showed American employers added 254,000 jobs to their payrolls, and the unemployment rate fell slightly to 4.1%. Until May, the unemployment rate was riding a sub-4% streak of two straight years. Even above 4%, the unemployment rate is low.

The consumer price index, a popular measure of inflation, is currently at an annual rate of 2.4%. The next CPI report won’t come out until after the election. Annual inflation peaked at 9.1% in June 2022.

Americans taking part in The Conference Board’s Consumer Confidence Index tend to overestimate inflation.

The Conference Board asked people about their year-ahead inflation expectations. Americans expect inflation to be 5.3% a year from now, even though it has already fallen below 3% and is well on its way to reaching the Fed’s target of 2% inflation.

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