American consumers are displaying a notable boost in confidence in the economy in the days leading up to Election Day, according to a business research group.
What the Data Shows
According to the latest data from the Conference Board on Tuesday, the consumer confidence index surged to 108.7 in October, up from 99.2 in September. This leap represents the most significant monthly increase since March 2021, surpassing analyst expectations, who forecasted a modest 99.3.
This comes as Election Day (November 5) quickly approaches in which Vice President Kamala Harris, the Democratic nominee, will face off against former President Donald Trump, the GOP nominee.
The consumer confidence index provides a pulse on Americans’ perceptions of current economic conditions and their outlook for the next six months. Particularly telling is the jump in short-term expectations for income, business conditions and the job market, which reached 89.1. This number is critical, as a reading below 80 may signal an impending recession, according to the Conference Board.
Additionally, the share of consumers predicting a recession within the next year has dipped to its lowest level since mid-2022.
Shoppers peruse merchandise at a Kohl’s in Ramsey, New Jersey on October 10, 2024. American consumers are displaying a notable boost in confidence in the economy, according to a business research group.
Seth Wenig/AP
The board reported on Tuesday that consumers’ view of current conditions climbed 14.2 points to a reading of 138.
Meanwhile, the number of respondents saying they planned to buy a home or car continued to rise.
Dana Peterson, chief economist at the Conference Board, noted the shifting perspectives.
“Consumers’ assessments of current business conditions turned positive,” Peterson said in a statement. “Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data.”
What Is Happening in the Labor Market
Despite the Labor Department’s report of a decline in job openings to the lowest point since January 2021, possibly signaling that the labor market is losing some momentum, the labor market remains relatively robust. The U.S. economy added 254,000 jobs in September, lowering the unemployment rate to 4.1 percent as openings remain well above pre-pandemic levels.
This comes as tepid jobs numbers from July and August had been dragging on Americans’ confidence along with receding inflation.
What Else Contributed to the Rise in Confidence?
Economic experts also attribute the rise in confidence to the Federal Reserve’s recent decision to cut its benchmark interest rate by 50 basis points, double the usual amount. This action, the Fed’s first rate reduction in over four years, is aimed at stimulating the economy in light of a gradually softening labor market.
The Fed has signaled additional rate cuts later this year and anticipates several more reductions in 2025 and 2026.
With consumer spending accounting for almost 70 percent of U.S. economic activity, this surge in consumer confidence could have meaningful economic implications. Whether this optimism will hold post-election remains to be seen, but, for now, Americans appear to be looking toward the future with increased confidence.
This article includes reporting from The Associated Press.