Despite rising inflation fears, US consumer confidence unexpectedly grew four points from 109.8 to 113.8 in October. Improving labor market opportunities is trumping inflation concerns.
This can also mean that economic growth is about to take off after a wild third quarter.
Increasing Consumer Confidence Signals Economic Resurgence
According to Christopher Rupket, chief economist of FWDBONDS, he foresees the US economy strongly finished the year. “Consumers are more upbeat after a rocky third quarter and this argues for a strong finish for the economy in 2021.
Consumers know the tight labor market has its backs. Those forecasting a recession from the drop in the confidence late in the summer will have to back off that call,” he said.
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The October rise of the US consumer confidence index halts its three-month decline. In fact, economists were predicting a decline to 108.3. However, the 113.8 score is still way below the June peak of 128.9.
The rebound also coincided with the decline in coronavirus cases across the country. In addition, the labor market difference zoomed to a 21-year high.
This metric shows whether Americans think the job market has plenty to offer or is low on placement.
Job Growth Is Picking Up Again
Ryan Sweet, Moody’s Analytics senior economist, said that the labor market is picking up. This is another sign that job growth reaccelerated in October.
It points toward a decline in the unemployment rate in October,” he said. Consequently, stocks are starting to trade higher again. Even the US dollar posted gains against a basket of currencies. Meanwhile, US Treasury prices remain mixed.
Even as many consumers feared inflation, many Americans plan to increase their spending. Buying intentions for automobiles went up after posting nine-month lows.
Most Americans are looking forward to buying new appliances such as TVs, refrigerators, and washing machines within the next six months.
Americans Thinking of Paying Forward to Avoid Future High Prices
However, some economists believe that the rise in spending means that some Americans are thinking ahead. They want to buy items while they remain locked in their current prices. By buying now, they can avoid the further effects of inflation in terms of higher prices.
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The third-quarter gross domestic product growth, which the US government will release on Thursday, will likely show that consumer spending froze last quarter after growing 12% between April to June.
Because of the weak spending, third-quarter GDP growth will likely end up around or below 3%. Product shortages and the delta variant surge are the likely suspects for the decline in GDP growth.”
Slower growth doesn’t imply a weak economy,” noted Naroff Economics’ Joel Naroff. “There is nothing soft about it, at least when it comes to demand.”
Travel Also Likely To Increase
This quarter’s consumer spending will also likely get a boost from travel. Consumers who said they plan to embark on flights within the next six months. From 42.3% in September, around 47.6% of respondents now want to fly to a vacation destination.
Watch the Bloomberg: Quicktake Now video reporting that US consumers are feeling confident:
Do you plan on spending more this coming quarter? Outside of the holidays, are you increasing your usual spending budget on vacation, gifts, or expenses?
Let us know what you think about US consumer confidence. Share your thoughts using the comments section below.