US consumer confidence rebounds; spending plans rise strongly

[WASHINGTON] US consumer confidence unexpectedly rose in October as concerns about high inflation were offset by improving labour market prospects, suggesting economic growth was picking up after a turbulent third quarter.

The survey from the Conference Board on Tuesday showed consumers eager to buy a home and big-ticket items such as motor vehicles and major household appliances over the next six months. The share of Americans planning to go on vacation was the largest since February 2020, just before the nation was slammed by the first wave of Covid-19 infections.

Coronavirus infections over the summer, driven by the Delta variant, and supply chain constraints related to the pandemic restrained economic activity last quarter.

"Consumers are more upbeat after a rocky third quarter and this argues for a strong finish for the economy in 2021," said Christopher Rupkey, chief economist at FWDBONDS in New York.

"Consumers know the tight labour market has their backs. Those forecasting a recession from the drop in the confidence late in the summer will have to back off that call."

The consumer confidence index increased to a reading of 113.8 this month from 109.8 in September, ending three straight monthly declines.

The measure, which places more emphasis on the labor market, remains below its peak of 128.9 in June. The rise was in contrast with the University of Michigan's survey of consumers, which showed sentiment ebbing early this month.

Economists polled by Reuters had forecast that the index would dip to 108.3. The Conference Board's so-called labour market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, raced to a reading of 45 this month, the highest in 21 years, from 43.5 in September.

This measure closely correlates to the unemployment rate in the Labor Department's closely watched employment report. There were 10.4 million job openings at the end of August.

Consumers' inflation expectations over the next 12 months jumped to 7.0 per cent, the highest in 13 years, from 6.5 per cent last month.

Despite perceptions of high inflation, consumers planned to step up spending. Buying intentions for motor vehicles rebounded from a nine-month low. More consumers intended to purchase household appliances like washing machines, television sets and refrigerators over the next six months, suggesting consumer spending would regain steam after an apparent sharp deceleration last quarter.

REUTERS