Dive Brief:
- Consumer confidence exceeded expectations this month, rising to the highest level since June as the price of gasoline edged down from September, the Conference Board said Tuesday.
- The Consumer Confidence Index increased in October by 7.5 points to 91.7, nudged up by an improvement in future expectations and a brighter view toward the present situation for business and employment, the Conference Board said, citing a survey.
- “The recovery was in line with retail gasoline prices easing from September to October,” Fergus McCormick, senior economist for global indicators at the Conference Board, said in a statement. Still, “consumer confidence remained on the long-term downward trend that’s persisted over the past few years,” he said, noting that stubborn inflation has “eroded consumers’ purchasing power.”
Dive Insight:
Relentless price pressures have undermined real incomes and strained household budgets for several months, influencing the outlook of voters with the approach of the Nov. 3 mid-term elections.
Measures of the mood among consumers — including surveys by the University of Michigan and New York Fed — have traced a decline in sentiment since February, when air strikes by the U.S. and Israel against Iran led to a reduction in the supply of crude oil, pushing up fuel costs.
The average price for a gallon of gasoline has surged 28% during the past year to $4.26, according to AAA. During the past month, though, the price has fallen from $4.47 for a 4.7% decline.
Despite some relief at the gas pump since September, “consumers continued to express frustration with rising costs,” McCormick said, adding that “references to prices, the high cost of food and groceries, and oil and diesel prices rose” in write-in survey responses.
In turn, consumers plan to trim spending on services and durable goods over the next six months, the Conference Board said.
“The mood among consumers remains pretty bleak,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a note.
“The recovery in the headline index to its highest level since June comes as a surprise, given the still-high level of gas prices, stalling stock price appreciation and the lackluster labor market,” Tombs said, referring to the Confidence Index.
Consumers do not anticipate relief from price pressures anytime soon, expecting 5.8% inflation on average in 12 months, the Conference Board said.
Recent surveys by the Federal Reserve Bank of New York and University of Michigan have shown rising inflation expectations. Fed officials closely track expectations for inflation, believing such sentiments can become self-fulfilling.
Recent data have aligned with the worsening consumer expectations for inflation.
Rising fuel prices pushed up the Consumer Price Index in September to a higher-than-forecast annual rate of 3.7%, the Bureau of Labor Statistics said this month.
The soaring cost of energy is showing signs of spreading throughout much of the economy. The so-called core CPI index for items excluding volatile food and energy prices last month increased 2.6% on an annual basis compared with 2.4% in August.
Inflation has exceeded the Fed’s 2% target for more than five years.
Central bank officials on Tuesday began a two-day meeting to consider changes to monetary policy. The Fed will release a post-meeting statement on Wednesday, followed by a press conference by Chair Kevin Warsh.
