Consumer Confidence Roars to 18-Year High Ahead of Holidays

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The U.S. economy continues to be a mighty engine. Consumer confidence reached an 18-year high this month. Marry that to low unemployment and sharply rising gross domestic product, and America enters the critical holiday retail period at full speed.

According to the Conference Board’s Consumer Confidence Survey, its primary index reached 137.9 (1985=100), up from 135.3 in September. The association has two other measures of consumer health. The first is the Present Situation Index, which relies on data on consumers’ opinions of current business and labor market conditions. It moved from 169.4 in September to 172.8. The Expectations Index is based on data concerning consumers’ short-term outlooks for income, business and labor market conditions. This rose from 112.5 in September to 114.6.

As the survey was released, Lynn Franco, Senior Director of Economic Indicators at the Conference Board, said:

Consumer Confidence increased in October, following a modest gain in September, and remains at levels last seen in the fall of 2000 (September 2000, 142.5). Consumers’ assessment of present-day conditions remains quite positive, primarily due to strong employment growth. The Expectations Index posted another gain in October, suggesting that consumers do not foresee the economy losing steam anytime soon. Rather, they expect the strong pace of growth to carry over into early 2019.

On a more detailed basis, people who think jobs are “plentiful” rose to 44.1% to 45.9%. Those who claimed jobs are “hard to get” dropped from 14.1% to 13.2%. Those who were optimistic about the “short-term future” increased further from 25.8% to 26.3%.

The results likely will be very favorable for the economy near term. Most experts say that consumer activity is at least two-thirds of gross domestic product. And that activity peaks in the holiday season, which traditionally runs from November 1 until the end of the year. The National Retail Federation expects retail sales to rise between 4.3% and 4.8% over 2017 to between $717.45 billion and $720.89 billion.

Finally, the economy is often a virtuous cycle, one in which consumer spending drives employment and employment drives gross domestic product. For the next few months, the economy has a green light.