Americans are feeling more optimistic about the recovery, which has continued to go strong into the final month of the year. And this is good news for the New Year as well.
A measure of consumer confidence has risen to 115.8 points in December, more than economists had predicted and exceeding the November level, according to data from The Conference Board. For reference, the index stood at 100 in 1985.
Concerns about inflation declined some, and similarly worries about the pandemic receded in spite of the rise in cases and the discovery of the highly infectious Omicron variant.
Even though Americans’ feelings were more or less unchanged about the present state of the economy, expectations about short-term growth prospects improved.
“The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased,” said Lynn Franco, senior director of economic indicators at The Conference Board.
“The concern among consumers towards inflation is assuaged somewhat by strong income expectations,” said Thomas Simons, money market economist at Jefferies.
At least for now.
But we’re not out of the woods when it comes to the dynamics that made consumers nervous this year: “Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic,” said Franco.
The economy did slightly better than expected in the summer
In other economic news of the morning, America’s gross domestic product, the broadest measure of economic activity, was revised up for the third quarter.
According to new data from the Bureau of Economic Analysis the US economy expanded at an annualized rate of 2.3% between July and September, according to a third estimate of the data. It was a slightly faster pace than the 2.1% previously reported. The revision came on the back of slightly stronger consumer spending and inventory investment.
Even so it was still a slowdown from the 6.7% annualized expansion in the second quarter. And the drop-off was, in turn, due to people spending a lot less than they had in the spring when the last round of stimulus checks from Washington kept Americans shopping.
Over the summer, the recovery encountered some hurdles as the Delta variant of the coronavirus put a damper on the resumed economic activity and led consumers to adjust their behavior. Making matters worse, the supply chain crisis held back the recovery.
But economists are hopeful that the recovery picked up pace again in the final quarter of the year.
The Federal Reserve Bank of Atlanta predicts the economy will expand at an annual rate of 7.2% between October and this month, according to last week’s update to its GDPNow model.