Americans are more confident in the economy than analysts expected and that confidence has been growing throughout the summer. The Conference Board released its consumer confidence survey for August, with a 103.3 rating, beating the 100.7 expected and exceeding July’s 101.9 surprise.
It’s the highest confidence rating in months, but there’s more behind the headline number.
Conference Board Chief Economist Dana Peterson said that while consumers are more positive about business conditions now and in the future, they’re also more concerned about the labor market.
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In July, unemployment rose to 4.3%. In August, fewer people told the Conference Board jobs were “plentiful” while slightly more said jobs were “hard to get.” Fewer people also expected their incomes to increase this year, while more expected their incomes to decrease.
That said, Americans’ inflation expectations dropped to their lowest level since March 2020. That comes as the Federal Reserve’s own inflation expectations are getting more rosy, as Fed Chair Jerome Powell addressed in his Jackson Hole speech last week.
“Inflation is now much closer to our objective, with prices having risen 2.5% over the past 12 months,” Powell said. “After a pause earlier this year, progress toward our 2% objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2%.”
“He is confident now, not just waiting for more confidence, but confident that inflation is moving lower,” Central Bank Central Editor-in-Chief Kathleen Hays emphasized in an interview with Straight Arrow News. “It’s heading for that 2% target. And the concern is unemployment.”
Powell’s speech signaled a likely rate cut coming in September, and Americans are expecting interest rates to decline. That expectation, however, hasn’t made Americans rethink buying homes. Average responses over the past six months show plans to purchase homes are at a new 12-year low. But Americans are planning more smaller purchases. Buying plans for cars, refrigerators, TVs, washing machines, smartphones and laptops all increased.
Overall, Americans are feeling better about their family’s financial situation moving forward. They don’t see the results of the election causing much volatility in the economy and recession expectations are unchanged in August and well below 2023’s peak.
But confidence can be drawn along income lines. Those making less than $25,000 are feeling less confident overall, while those making more than $100,000 are the most optimistic.
Businesses, investors and the Federal Reserve all pay close attention to measures of consumer confidence. It’s a window into how much buying power Americans are comfortable yielding, and household spending accounts for more than two-thirds of the U.S. economy.
