WASHINGTON (Reuters) – U.S. consumer confidence rebounded more than expected in September amid an improvement in labor market views, but it remained below levels that prevailed before the COVID-19 pandemic struck the nation early this year.
The surge in confidence reported by the Conference Board on Tuesday came despite a resurgence in new coronavirus cases in some parts of the country and as government help for businesses and the unemployed dries up. Consumers also appeared to shrug off growing uncertainty ahead of the Nov. 3 presidential election.
Some economists said the strong confidence reading could ease pressure on the White House and Congress for another rescue package.
“The sheer magnitude of today’s rise tells us the consumer thinks the worst days of the recession are over,” said Chris Rupkey, chief economist at MUFG in New York. “It’s a big step forward for the economy and is supportive of stronger growth in the fourth quarter even if Washington remains unable to provide additional fiscal stimulus.”
The Conference Board’s consumer confidence index increased to a reading of 101.8 this month from 86.3 in August. Economists polled by Reuters had forecast the index edging up to a reading of 89.5 in September. The index topped 130 early this year.
The cutoff date for the survey was Sept. 18.
The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, increased to a reading of 98.5 from 85.8 in August. The expectations index based on consumers’ short-term outlook for income, business and labor market conditions jumped to 104.0 from a reading of 86.6 in August.
The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, improved to a reading of 2.9 this month from -2.2 in August. That measure closely correlates to the unemployment rate in the Labor Department’s employment report. It has dropped from as high as 38.3 in August last year.
Stocks on Wall Street were mixed ahead of the first presidential debate. The dollar fell against a basket of currencies. U.S. Treasury prices rose.
The share of consumers expecting an increase in income rebounded to 17.5% this month from 13% in August and the proportion anticipating a drop declined to 12.6% from 16%.
New daily COVID-19 cases started spiking last week for the first time in eight weeks. Government money to help businesses with wages has virtually dried up, and tens of thousands of airline workers are facing layoffs or furloughs in October.
A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, whose funding is already running out.
“Consumer spending will be a key driver of the ongoing economic recovery,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “But risks are to the downside, including a surge in coronavirus cases, fading hopes of further fiscal stimulus, a volatile stock market, and uncertainty surrounding the presidential election.”
A separate report from the Commerce Department on Tuesday showed the trade deficit in goods increased in August, with imports surging as businesses rebuild inventories, which were depleted early in the pandemic.
Still, the widening in the goods trade gap did not change expectations for a record jump in gross domestic product in the third quarter after output plunged in the April-June period at its steepest pace since 1947.
The economy slipped into recession in February. The economy got a boost over the summer from the reopening of businesses and fiscal stimulus from the government.
The goods trade gap increased 3.5% to a record $82.9 billion last month. Imports of goods rose 3.1% to $201.3 billion, eclipsing a 2.8% increase in goods exports to $118.3 billion.
The rise in imports was led by consumer goods, which jumped 7%. There were also strong gains in imports of food, capital and consumer goods. But imports of industrial supplies fell 4.6%.
Exports of industrial supplies, food and consumer goods rose. But shipments of motor vehicles and parts and capital goods fell.
Trade could subtract from GDP growth in the third quarter for the first time since the second quarter of 2019. But with much of the imports going to replenish inventories, the hit to GDP growth from the bigger goods trade deficit could be modest.
The Commerce Department also reported on Tuesday that retail inventories increased 0.8% in August after rebounding 1.2% in July. Motor vehicle and parts inventories gained 0.6%.
Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of GDP, shot up 0.9% after climbing 0.6% in July.
Wholesale inventories rebounded 0.5% in August after dipping 0.1% in the prior month. Inventory accumulation is expected to contribute to GDP growth in the third quarter after subtracting from output for five straight quarters.
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