U.S. consumer sentiment has rebounded in a big way in early October, which is a really good sign.
A huge rebound in U.S. consumer sentiment in early October may indicate that the economy may be getting ready to really soar to new heights.
At the very least, the rebound indicates that the economic recovery is on track, even though a strong dollar and low demand globally threatens to undercut some of those gains, according to a Reuters report.
For those reasons, there are still underlying worries in manufacturing and the rest of the industrial sector, but the rebound in consumer sentiment — announced on Friday — shows that there is a lot of domestic demand, and strong consumer spending could cause economic growth to head upward even with those underlying problems. That’s especially good news considering the run of slow growth in recent months.
The consumer sentiment index increased to 92.1 in early October, compared to 87.2 in September, a very sizeable increase, according University of Michigan data as reported by Reuters. In addition, the sub-index for current conditions jumped from 101.2 to 106.7 over the same time period.
It means that U.S. households may be increasingly optimistic about their financial futures, which means they are more likely to open their wallets and buy things they had been putting off purchasing.
A few things are helping out: cheaper gasoline prices leave consumers with more money in their pockets, for one thing.
But this may be an indication that the U.S. economy has truly turned a corner. This is the most optimistic consumers have been since 2007, before the market crash and the beginning of the recession.
And it wasn’t just about short-term spending too: consumers are also optimistic about long-lasting goods and bigger purchases.
This is a particularly big deal considering that consumer spending makes up about two thirds of all U.S.e conomic activity, and it has helped spur growth even as the industrial sector sputters and strong dollar slows things down.
U.S. stocks moved upward on the news on Friday, and the dollar continued its rise against other currencies.
Richard Curtin, the University of Michigan’s chief economist for the Surveys of Consumers, posted the following statement on the University of Michigan’s website on the new numbers:
“The rebound in confidence signifies that consumers have concluded that the fears expressed on Wall Street did not extend to Main Street. Importantly, the renewed confidence did not simply represent a relief rally, but instead reflected renewed optimism. Personal financial expectations rose to their highest level since 2007, as did consumers’ views toward purchases of durable goods. While consumers anticipate a continued economic expansion, many expected strong headwinds from falling commodity prices, weakened economies in China and elsewhere as well as continued stresses on European countries. Perhaps the most important finding is that low inflation and continued job growth have enabled consumers to adapt to a slower and more variable rate of economic growth by varying the pace of their spending without losing confidence that the expansion will continue. Overall, the data still indicate that consumption will expand at 2.9% during 2016.”