American consumers are feeling good again.
Supply chain issues and sky-high inflation have done little to knock consumer confidence as people plan to spend big on big-ticket purchases, such as houses, cars and major appliances. And that’s a strong signal that consumer spending will continue through the holiday season and the end of the year.
The consumer confidence index rose to 113.8 points in October, beating economists’ expectations and reversing a three-month downward trend, according to The Conference Board, which puts the index together. It was the highest level since July, when the index stood at 125.1 points.
Consumers’ perception of present conditions and expectations for the future also both rose, reversing the same three-month downward trend. Americans are feeling better in large part because their concerns around the more infectious Delta variant have eased.
This also showed up in people’s plans: Nearly half of the respondents to the consumer survey said they intend to take a vacation in the next six months, the highest level of prospective travelers since before the pandemic.
“While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted,” said Lynn Franco, The Conference Board’s senior director of economic indicators.
Last month, for example, consumer price inflation ticked back up to the 13-year high it stood at in June and July. Remarkably, though, Americans seem somewhat unfazed by the price increases, especially as survey respondents say they expect prices to rise even further.
American households are in good shape and can absorb the higher costs, at least for now. “And most of that is due to the job market,” said Jennifer Lee, senior economist at BMO. “And though the share of those respondents finding that jobs are plentiful slipped a bit this month, the share of those who find that jobs are hard to get fell even more.”
With the labor market recovery coming along, high inflation may be sustainable for a while before prices get so high that people begin to reconsider large purchases.
The next look at the nation’s employment situation is due Friday, November 5.