Economic Impact: Consumer Confidence Running High

by Christine Chmura: Consumer confidence was higher inwards August than it has been since Oct 2000.

The Conference Board’s index, which is published monthly, reflects consumers’ perception of concern health, occupation as well as income for the electrical flow calendar month every bit good every bit vi months into the future.

Since it is indexed to 1985, the August 2018 value of 133.4 way consumers experience close 33 percent improve close today’s economical weather than they did inwards 1985.

As a scream for of reference, the unemployment charge per unit of measurement averaged 7.2 percent inwards 1985 as well as was decreasing over the year. Inflation, which started the decade of the 1980s amongst double digits, retreated to 3.5 percent inwards 1985 as well as slowed farther inwards 1986.

In 1985, President Ronald Reagan started his minute term inwards office, the Food as well as Drug Administration approved a blood exam for AIDS, 21-year-old Whitney Houston released her debut album, as well as Microsoft Corp. released its starting fourth dimension version of Windows 1.0.

The previous recession ended inwards Nov 1982 as well as the economic scheme continued to grow until entering some other recession inwards July 1990.

The Consumer Confidence index is widely watched because it is 1 of the starting fourth dimension economical indicators available each month.

It is besides of import because consumer spending makes upwards close seventy percent of gross domestic product.

Historically, however, consumer spending as well as confidence solely exhibit a tight correlation some recessions — confidence drops off chop-chop every bit the economic scheme deteriorates as well as the unemployment charge per unit of measurement rises.

In contrast, when economical surgical physical care for starts to improve, confidence shoots upwards as well as consumer spending increases, peculiarly on high-dollar items that consumers delayed purchasing for fearfulness that their jobs mightiness larn cut.

Now, dorsum to the present. Consumer optimism besides improved inwards August amongst an increment inwards the percent of consumers anticipating improved concern conditions.

With the unemployment charge per unit of measurement continuing to pass upwards as well as many consumers benefiting from the federal taxation cuts, consumer optimism is yet 1 to a greater extent than signal of favorable weather for continued growth.

There are no apparent imbalances or bubbles that volition precipitate a recession anytime soon, which points toward increasing consumer confidence inwards the months ahead.
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Christine Chmura is president as well as primary economist at Chmura Economics & Analytics. H/T Jefferson Policy Journal.

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