Consumer confidence climbs, led by 'renewed optimism about short-term outlook'

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Tuesday’s economic indicators shed some positive light on the economic recovery, as consumer confidence jumped way up after two months of declines and home price indices came in higher than what was expected.

The consumer confidence index rose in September to 101.8 from 86.3 in August, ending a two-month streak of declines, The Conference Board reported Tuesday.

The present situation gained to 98.5 from 85.8, while the expectations index increased to 104.0 from 86.6.

Economists polled by IFR Markets expected confidence to rise to 89.2.

“Consumer confidence increased sharply in September, after back-to-back monthly declines, but remains below pre-pandemic levels,” said Lynn Franco, senior director of economic indicators at The Conference Board. “A more favorable view of current business and labor market conditions, coupled with renewed optimism about the short-term outlook, helped spur this month’s rebound in confidence. Consumers also expressed greater optimism about their short-term financial prospects, which may help keep spending from slowing further in the months ahead.”

Scott Anderson, chief economist at Bank of the West noted the 15.5 point increase is the biggest monthly gain since April 2003 and puts consumer confidence at its highest level since March.

“More consumers think jobs are more plentiful than hard to get for the first time since March, and are more optimistic about their income prospects over the next six months, suggesting continued gains in consumer spending over the near term," Anderson said. "Moreover, consumers expressed increased optimism about their income prospects over the next six months, which, combined with an increase in the percentage of consumers planning to make a major purchase, suggests continued consumer spending gains over the near term."

Case-Shiller home prices indices
Home prices increased 4.8% year-over-year in July, after climbing 4.3% last month, according to S&P CoreLogic Case-Shiller.

Economists estimated prices would gain 3.8% year-over-year.

“Solid demand and rock-bottom mortgage rates are supporting home price gains across much of the country,” Anderson said.

Year-over-year, the 10-city composite gained 3.3%, up from the 2.8% gain a month earlier, while the 20-city composite rose 3.9%, after a 3.5% increase a month earlier.

“Housing market resiliency persisted throughout summer as traditional first-time buyers sought refuge in larger square footage and outdoor space, and buyers who had not been financially impacted by the pandemic sought second homes in resort, beach and mountain areas,” according to Selma Hepp, deputy chief economist at CoreLogic. “Demand will likely keep home price growth strong over the coming months. And, continued price growth will help insulate homeowners’ equity position, which will be particularly helpful to owners who have been financially impacted by the pandemic and opted for a forbearance program. Those homeowners may be able to sell a home without going through a short sale or a foreclosure.”

Month-over-month, the national index gained 0.8% in July, slightly higher than the 0.6% increase in the previous month. The 10-city composite and the 20-city composite both climbed 0.6%.

Economists predicted a 0.3% rise month-over-month.

“Housing prices rose in July,” says Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. “The strength of the housing market was consistent nationally – all 19 cities for which we have July data rose, with 16 of them outpacing their June gains.”

Dallas Fed services survey
Texas service sector activity “grew at its fastest pace since February,” according to the Federal Reserve Bank of Dallas.

The current general business conditions index jumped to 11.5 in September from 4.7 in August, while at the company level, the index also grew to 9.7 from 5.6.

The outlook uncertainty index dropped to zero from 5.7 the month before.

The revenue index climbed to 14.0 from 1.5, the employment index gained to positive 2.7 from negative 0.3, and the part-time employment index grew to 3.7 from 0.1.

The hours worked index increased to positive 6.6 from negative 1.0, wages and benefits gained to 7.1 from 4.9 and input prices decreased to 19.4 from 22.2.

Selling prices slipped to 2.2 from 4.4 and capital expenditures rose to positive 4.9 from negative 0.5.

Looking six months ahead, the general business activity outlook index dipped to 18.9 from 19.2, while the company outlook dropped to 20.8 from 21.9.

The future looking revenue index fell to 31.9 from 35.5, employment six months ahead moved lower to 19.5 from 21.9 and part-time employment rose to 4.8 from 1.8.

Future outlooks for hours worked gained to 9.0 from 7.2, while wages and benefits increased to 27.2 from 23.8 and input prices dipped to 30.2 from 32.0.

Future selling prices climbed to 14.5 from 13.8 and capital expenditures six-month outlook fell to 11.5 from 17.3.

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Economic indicators Federal Reserve Bank of Dallas