Consumer confidence unexpectedly rises in October
The Confidence Board’s consumer confidence index increased to a reading of 113.8 this month from 109.8 in September, ending three straight monthly declines. Economists polled by Reuters expected the index to drop to 108.3. The present situation index, based on consumers’ assessment of current business and labor conditions, rose 3.1 points to 147.4. The expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, improved 4.6 points to 91.3.
Concerns about the spread of the Delta variant of Covid eased, driving the unexpected increase in consumer confidence. The Confidence Board noted, “While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”
Economists say a pickup in buying intentions suggests consumers are willing to spend despite rising inflation, or perhaps, because they believe prices will be even higher in the future. Expectations for wage inflation also appears to be helping consumer confidence, with 18.7% of respondents expecting their incomes to increase over the next six months.
