November 28, 2017 - Consumers are more confident than they have been since the early 2000s, as unemployment hit a 17-year low and the stock market continues to hit highs.
The Conference Board on Tuesday said its index of U.S. consumer confidence increased to 129.5 in November from 126.2 in October, which was already the highest level in 17 years.
The boost in economic zeal was felt across multiple income levels, with those making less than $25,000 a year and people making in the low six figures range posting more than one-year highs in confidence.
Increasing numbers of U.S. consumers felt business conditions were better and jobs were plentiful, just as the unemployment rate dropped to 4.1% in October, a 17-year low, and the stock market is repeatedly hitting all-time highs.
“Consumers’ assessment of current conditions improved moderately...driven primarily by optimism of further improvements in the labor market. Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018,” said Lynn Franco, Director of Economic Indicators at The Conference Board.
Over the medium term, gauges of business and household confidence have been by higher since last year’s presidential election. Still, despite consumer optimism and a seemingly rosy jobs picture, spending growth has moderated since the beginning of 2017.
This consumer spending moderation hasn’t seemed to phase business owners, who have continued to steadily increase capital investments since the middle of 2016, which marked the best run in investments since 2010, when the U.S. was coming out of the recession.
November’s booming consumer confidence report comes right as the Federal Reserve is widely expected to increase short-term interest rates for a third time before the end of the year. The combination of increased confidence and a tight labor market could lead to a roaring economy that sees inflation rise significantly above what the Fed considers healthy. The latest confidence reading shows the Fed may have to pick up the pace of rate increases next year.
“[The confidence] is signaling an ongoing downtrend in the unemployment rate, which may be too low for the Fed already. It’s highly likely they’ll tighten in December. We’re seeing no sign that the labor market is losing momentum,” said Jim O’Sullivan, chief U.S. economist for HFE.
Source: The Wall Street Journal