Consumer Confidence Gains Ground, Up Again in September

Written by David Schollaert

US consumer confidence expanded again in September, extending a rebound in sentiment that began with a strong jump in August and reaching its highest level since April, The Conference Board reported.

Results in September were better than expected, measuring 108 points and building on the 103.6 reading in August. The repeated gain and steady month-on-month (MoM) bump in consumer sentiment improved on both the current state of the labor market and business conditions.

Americans became more optimistic about the US economy over the past 30 days, with the latest survey indicating that a strong job market and lower gas prices are contributing to more optimistic views of the economy.

“Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages, and declining gas prices,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The Present Situation Index rose again, after declining from April through July. The Expectations Index also improved from summer lows, but recession risks nonetheless persist. Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year.”

The headline index rose by 4.4 points in September to a reading of 108. The back-to-back monthly increases follow three straight monthly declines earlier in the year as American households were hammered by rising prices, particularly at gas pumps, according to the report.

“Meanwhile, purchasing intentions were mixed, with intentions to buy automobiles and big-ticket appliances up, while home purchasing intentions fell,” said Franco. “The latter no doubt reflects rising mortgage rates and a cooling housing market.”

The present situation index, which measures consumer sentiment toward current business and labor market conditions, rose to 149.6 from 145.3 last month. The expectations index, which assesses the short-term outlook for income, business, and labor market conditions, jumped to 80.3 from 75.8.

“Looking ahead, the improvement in confidence may bode well for consumer spending in the final months of 2022, but inflation and interest-rate hikes remain strong headwinds to growth in the short term,” added Franco.

Calculated as a three-month moving average (3MMA) to smooth out volatility, The Conference Board’s Composite Index was 102.3 in September, a 3.2-point increase versus August. The figure rose for the first time after declining for seven straight months prior, falling further from a pre-pandemic high of 130.4 in February 2020.

The Composite Index is made up of two sub-indexes: consumers’ view of the present situation and their expectations for the future. Figure 1 below notes the 3MMA linear trend lines from January 2012 through September 2022 versus the trend lines of all three subcomponents of the index: Present Situation, Composite, and Future Expectations. All three were above the average composite line prior to the pandemic before falling consecutively through February 2021. The surge from March through June of 2021 pulled all three indexes above the composite line once again. But economic uncertainty has since really eroded confidence and expectations, despite a recent recovery.

ConConf Figure1

The table below compares September 2022 with September 2021 on a 3MMA basis. The headline index and its two sub-indexes are all declining on a year-on-year (YoY) basis. Present Situation has seen a less aggressive fall, but two out of three are down by double-digits, with Expectations showing the most volatility over the same period. All three are showing improved momentum through September.

When compared to the same 2019 pre-pandemic period, the Composite index is down 29.8 points on a 3MMA basis. The Present Situation is down 27.6 points, while the Expectations reading is down 31.3 points in September when compared to the same period in 2019. The consumer confidence report includes employment data and purchase plans. These are summarized in the table below.

ConConf Tabel1.2

People found jobs more plentiful in September and were more optimistic about wage increases compared to the month prior. The differential between those finding jobs and those having difficulty was 38 in September, up from 36 in August. The measure, despite recent fluctuation, is still not too far from the most recent pre-pandemic high and below 44.1 a year ago. The difference between those expecting wages to rise versus those expecting wages to fall is 4.1, up 1.4 points MoM, but down from the recent high of 11.6 last June.

Buying intentions for big-ticket items — cars, homes, and major appliances — diverged a bit in September, the report said. Rising costs remain the top concern for consumers, though, a position that is likely to continue, as the Fed recently raise its benchmark rate again.

Auto buying saw the largest percentage increase in September, up 10.4%, followed by home buying (+7.8%), while major appliance buying was down (-3.6%) over the same period. These recent dynamics and historical movements are illustrated below in Figure 2.

ConConf Figure2

Note: The Conference Board is a global, independent business membership and research association working in the public interest. The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen. The index is based on 1985 = 100. The composite value of consumer confidence combines the view of the present situation and of expectations for the next six months.

By David Schollaert,

David Schollaert

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