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Economy in Brief

U.S. Consumer Confidence Rises in September; Highest Since April
by Winnie Tapasanun  September 27, 2022

• Up 4.4 pts. to higher-than-expected 108.0 in Sept., the second consecutive m/m rise following three straight m/m drops, supported by jobs, wages and falling gas prices.

• Present Situation Index increases for the second successive month, to a five-month-high 149.6, after falling from April through July.

• Expectations Index improves to 80.3, highest since February, but recession risks persist.

• Consumers more optimistic about the present labor market and the short-term labor market outlook.

• Inflation expectations, while continuing their retreat, remain high.

• The rising confidence possibly bodes well for consumer spending in Q4 '22, but inflation and interest-rate rises remain major factors to near-term economic growth.

The Conference Board U.S. Consumer Confidence Index rose 4.2% (-1.6% y/y) to 108.0 in September on top of an 8.7% rise to 103.6 in August (+8.3%; 103.2 initially). The September reading registered the second successive monthly gain to the highest level since April, but it was still below 109.8 last September. A reading of 104.0 had been expected in the Action Economics Forecast Survey.

Consumers' views of present and future economic conditions improved this month. The Present Situation Index rose 3.0% (3.7% y/y) to 149.6 in September, the second consecutive m/m rise to the highest level since April, after a 4.0% increase to 145.3 in August. The index was slightly higher than 144.3 last September. The Expectations Index rose 5.9% (-7.4% y/y) to 80.3 this month, the second straight m/m gain to the highest level since February, after having recovered 15.5% to 75.8 in August. It was down 28.2% since the recent peak of 111.9 in March 2021 and below 86.7 last September.

Labor market readings showed more optimism this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, rose to 38.0% in September, the first monthly rise since June, from 36.0% in August. It was still below the record 47.1% in March and 43.5% last September. Calculated by Haver Analytics, this series has had a 68% correlation with the unemployment rate over the last ten years. The jobs plentiful measure rose this month to a three-month-high 49.4%, the first m/m rise since March, from 47.6% in August. But it remained below the record 56.7% in March and 56.5% last September. The jobs hard-to-get measure eased to 11.4% of respondents in September from 11.6% in August and 13.0% last September, but it was up from an expansion-low 9.6% in March.

Consumers viewed business conditions as more favorable compared to last month. Current business conditions were perceived as good by 20.8% of respondents in September, the highest since April, up from 19.0% in August and 19.1% last September. Expectations that business conditions would improve in six months were 19.3% of respondents, up from 17.3% in August but down from 21.7% last September and the record 42.5% in May 2020. More jobs were expected in six months by 17.5% of respondents, marginally up from 17.1% in August but down from 21.3% last September and the record 41.2% in April 2020. The percentage expecting rising income rose to 18.4% of respondents in September, the highest since November 2021, from 16.6% in August. It was slightly up from 16.9% last September.

Inflation expectations eased further this month but remained at a high level. The expected inflation rate in twelve months slipped to 6.8% in September, the lowest since January, from 7.0% in August (the series dates back to August 1987). The September reading was up from 6.5% last September and a 4.4% low in January 2020. A 66.3% of respondents expected that interest rates would rise over the next twelve months, slightly down from 69.6% in August but up from 62.4% last September.

The share of respondents planning to buy a home within six months fell back to 5.3% in September from 5.5% in August, reflecting rising mortgage rates and a cooling housing market. It was the same reading as last September but down from a 7.7% high in July 2020. Those planning to buy a major appliance showed 48.5% of respondents in September, up from 45.0% in August and 46.4% last September but down from a 53.9% high in July 2021.

The Consumer Confidence data are available in Haver's CBDB database. The total indexes, which are indexed to 1985=100, appear in USECON, and market expectations are in AS1REPNA.

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