The Conference Board announced Nov. 1 its Consumer Confidence Index increased again in October to a nearly five-year high of 72.2. Leaping from its last increase in September, when it hit 68.4, the index is at its highest point since February 2008, two months into the Great Recession.
“The Consumer Confidence Index increased again in October and is now at its highest level this year,” said Conference Board Director of Economic Indicators Lynn Franco. “Consumers were considerably more positive in their assessment of current conditions, with improvements in the job market as the major driver. Consumers were modestly more upbeat about their financial situation and the short-term economic outlook, and appear to be in better spirits approaching the holiday season.”
The monthly survey is carefully watched because it generally mirrors changes in consumer spending, which accounts for about 70 percent of total economic activity. Although still below a 90, which experts agree indicates a healthy economy, the index now far exceeds its low of 25.3 in February 2009.
“The lower unemployment rate and firming of housing prices has made consumers feel a little bit more confident,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Ala., told Bloomberg. “Household net worth is slowly but surely rebounding, particularly with house prices starting to go up. So that may be making consumers feel a little bit more confident about taking on bigger ticket expenditures.”
Consumers’ increased confidence was likely affected by their improved assessment of a variety of factors in October. For example, consumers claiming business conditions are “good” increased from 15.3 to 16.5 percent, while those responding business conditions are “bad” decreased from 33.8 to 33.1 percent. Consumers’ view of the job market also improved. In September 8.1 percent of consumers surveyed said they felt jobs were “plentiful,” but in October 10.3 percent of consumers gave the same response. Likewise, while 40.7 percent of those surveyed claimed jobs were “hard to get” in September, 39.4 responded as such in October.
Consumers were fairly more optimistic on future prospects in October. The percentage of respondents expecting business conditions to improve in the next six months increased from 17.9 percent in September to 21.4 percent in October. However, the number expecting business conditions to worsen also increased, from 14.5 percent to 15.1 percent.
More consumers surveyed in October expected their income to rise: 15.9 percent surveyed in September said they expected an increase income, while 16.7 percent gave the same response in October. Fewer customers expected the labor market to improve, however. In September, 18.1 percent of respondents said they expected more jobs in the months ahead, while 19.2 percent gave the same response in October.
Some economists say the improved customer confidence will only be temporary, however.
“We expect this improvement in confidence to fade, as Sandy, the looming fiscal cliff and lower equity prices all take a toll,” Capital Economics economist Amna Asaf told Market Watch.
