US Sept. consumer confidence posts biggest gain in 17 years
WASHINGTON — US consumer confidence rebounded by the most in 17 years in September amid an improvement in labor market views, but it remained below levels that prevailed before the COVID-19 pandemic struck the nation early this year.
The surge in confidence reported by the Conference Board on Tuesday came despite a resurgence in new coronavirus cases in some parts of the country and government help for businesses and the unemployed drying up. Consumers also appeared to shrug off growing uncertainty ahead of the Nov. 3 presidential election and signs the economy’s recovery from the recession was slowing.
“While today’s figure is on the face of it a fantastic result, we have to remain a little cautious given the mixed evidence from other sources,” said James Knightley, chief international economist at ING in New York.
The Conference Board’s consumer confidence index increased 15.5 points to a reading of 101.8 this month. That was the largest gain since April 2003. Economists polled by Reuters had forecast the index edging up to a reading of 89.5 in September. The index was at 132.6 in February.
The cutoff date for the survey was Sept. 18. The jump in the Conference Board’s confidence index is at odds with a modest increase in the University of Michigan’s consumer sentiment gauge. Economists said the rise in the Conference Board measure was driven by higher-income households, who have been least affected by unemployment during the pandemic. “High confidence today reflects reopened
activity but also policy’s success in ring-fencing the impact from the loss of activity. This is not the moment to open the gates,” said Steve Blitz, chief economist at TS Lombard in New York. “It underscores the recession’s narrow impact.”
The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, increased to a reading of 98.5 from 85.8 in August. The expectations index based on consumers’ short-term outlook for income, business and labor market conditions jumped to 104.0 from a reading of 86.6 in August.
The survey’s so- called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, improved to a reading of 2.9 this month from -2.2 in August. That measure closely correlates to the unemployment rate in the Labor Department’s employment report. It has dropped from as high as 38.3 in August last year.
Consumers were upbeat on their income prospects.
DOWNSIDE RISKS
New daily coronavirus disease 2019 (COVID-19) cases started spiking last week for the first time in eight weeks. Government programs to help businesses with wages have almost lapsed, and tens of thousands of airline workers are facing layoffs or furloughs in October.
A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, whose funding is already running out.
A separate report from the Commerce Department on Tuesday showed the trade deficit in goods widened in August, with imports surging as businesses rebuild inventories which were depleted early in the pandemic.
That, however, did not change expectations for a record jump in gross domestic product in the third quarter after output plunged in the April-June period at its steepest pace since 1947. The economy, which slipped into recession in February, received a boost over the summer from the reopening of businesses and fiscal stimulus from the government.
The goods trade gap increased 3.5% to a record $82.9 billion last month. Imports of goods rose 3.1% to $201.3 billion, eclipsing a 2.8% increase in goods exports to $118.3 billion.
The rise in imports was led by consumer goods, which jumped 7%. There were also strong gains in imports of food, capital and consumer goods. But imports of industrial supplies fell 4.6%.
Exports of consumer goods, industrial supplies and food rose. But capital goods, motor vehicles and parts shipments fell. Trade could be a drag on growth in the third quarter for the first time since the second quarter of 2019.
But with much of the imports going to replenish inventories, the hit to gross domesitc product (GDP) growth could be modest.
The Commerce Department also reported that retail inventories increased 0.8% in August after rebounding 1.2% in July. Motor vehicle and parts inventories gained 0.6%.
Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of GDP, shot up 0.9% after climbing 0.6% in July.
Wholesale inventories rebounded 0.5% in August after dipping 0.1% in the prior month. Inventory accumulation is expected to contribute to GDP growth in the third quarter after subtracting from output for five straight quarters. —