U.S. consumer confidence rises

2nd consecutive increase spurred by jobs, lower gas prices

Consumer confidence in the United States rose for a second month to its highest level since April, indicating that a strong job market and lower gas prices are contributing to more optimistic views of the economy.

The nonprofit Conference Board reported Tuesday that its consumer confidence index rose to 108 in September, from 103.6 in August. 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.

The business think tank’s present situation index — which measures consumers’ assessment of current business and labor market conditions — also rose again, to 149.6 in September, from 145.3 in August.

A measure of expectations by the Conference Board — reflecting consumers’ sixmonth outlook — climbed to 80.3, the highest since February.

Analysts surveyed by data provider FactSet had expected consumer confidence to rise slightly as gas prices fell from highs this summer of more than $5 per gallon.

The average price for a gallon of gas Tuesday in the

U.S. dropped to $3.75, and to $3.23 in Arkansas, according to AAA.

Consumer confidence has picked up on the heels of declining gas prices, but also because of a robust job market. However, consumer confidence remains depressed compared with prepandemic levels as inflation remains stubbornly high and the Federal Reserve aggressively raises interest rates.

FIGHTING INFLATION

Earlier this month, the Labor Department reported that consumer prices rose 8.3% from a year earlier and rose 0.1% from July. But the jump in “core” prices, which exclude volatile food and energy costs, remains worrisome.

Fueled by high rents, medical care and new cars, core prices leaped 6.3% for the year ending in August and increased 0.6% from July, the Labor Department reported earlier this month, outpacing expectations and stoking fear that the Fed will boost interest rates more aggressively at the risk of a recession.

Since March, the Fed has implemented its fastest pace of rate increases in decades to try to curb the highest inflation in 40 years, which peaked at 9.1% in June and has punished households with soaring costs for food, gas, rent and other necessities.

Last week, the Fed boosted its benchmark short-term rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level since early 2008.

It was the central bank’s third straight three-quarter point increase, and most economists and analysts expect more increases before year’s end.

SHIFTING SPENDING

Lynn Franco, the Conference Board’s senior director of economic indicators, said that consumers’ purchasing intentions for big-ticket items were mixed.

More people reported that they expected to buy cars or big appliances in the near future, but fewer reported that they intend to buy a house anytime soon, as rising interest rates have added hundreds of dollars a month to mortgage payments.

Last week, mortgage buyer Freddie Mac reported that the average rate on a 30-year mortgage for well-qualified applicants rose to 6.29%, the highest level since October 2008, when the housing market crashed and triggered a recession.

“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,” Franco said.

A separate report Tuesday showed U.S. sales of new homes unexpectedly rose in August, representing a break in an otherwise rapid descent of the housing market this year.

CONFIDENCE OUTLOOK

The median inflation rate seen over the next 12 months dropped in September to the lowest level since the start of the year. Separate data on inflation-adjusted consumer spending will be released Friday.

“Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages and declining gas prices,” said Franco.

The share of consumers who said jobs were “plentiful” increased to 49.4%, a historically elevated level. Six months from now, more respondents expected business conditions to improve.

That said, they’re more mixed about their short-term financial prospects.