Consumer Confidence in U.S. Increases to a Seven-Year High

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Consumer confidence advanced in October as Americans enjoyed further price drops at the gas pump and the job market continued to improve.

The Conference Board’s index climbed to 94.5 this month, the highest since October 2007, from a September reading of 89 that was stronger than initially estimated, the New York-based private research group said today. The gauge exceeded the most optimistic projection in a Bloomberg survey of economists.

More job security, gasoline prices at an almost four-year low, and a strengthening labor market are setting the stage for a stronger expansion. Bigger wage increases and a reduction in long-term unemployment would help keep sentiment improving and lay the groundwork for gains in spending, which makes up almost 70 percent of the economy.

“It appears as though we’ll have an extended period of lower energy prices, which should be helpful,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York. “It should boost confidence, give individuals a bit more discretionary income, so it’s a clear plus for the economy.”

Among other reports today, home prices rose in the 12 months ended in August at the slowest pace since November 2012. The S&P/Case-Shiller index of property prices in 20 U.S. cities climbed 5.6 percent from the same month last year. Nationally, prices increased 5.1 percent.

Orders for durable goods dropped unexpectedly in September on waning demand for machinery and computers, figures from the Commerce Department showed. Bookings for goods meant to last at least three years decreased 1.3 percent after declining 18.3 percent in August. The median forecast of 83 economists surveyed by Bloomberg called for a 0.5 percent gain.

Economists’ Estimates

The median forecast in the Bloomberg survey called for a reading of 87. Estimates of 77 economists ranged from 82 to 91.5 after a previously reported September index of 86. The Conference Board’s measure averaged 96.8 during the last expansion and 53.7 during the recession that ended in June 2009.

Stocks rose, sending the Dow Jones Industrial Average higher for a fourth day, as companies reported better earnings. The Dow average advanced 0.3 percent to 16,870.88 at 11:06 a.m. in New York.

The Conference Board’s gauge of consumer expectations barometer for the next six months jumped to 95, the highest since February 2011, from 86.4.

Present Conditions

The index of present conditions rose to 93.7 from September’s 93. The share of Americans who said business conditions were good climbed to 24.5 percent, the highest since September 2007.

Today’s report corroborates other readings on sentiment. The Thomson Reuters/University of Michigan preliminary October gauge also climbed to the highest level in seven years, while the weekly Bloomberg Consumer Comfort Index recently matched the second-highest level since August 2013.

The Conference Board’s data showed Americans’ assessments of current and future labor-market conditions improved. The share of Americans who said jobs were currently plentiful rose to 16.5 percent from 16.3 percent. The share who said jobs were hard to get fell to 29.1, the lowest since May 2008, from 29.4 in September.

A greater number of consumers expected more jobs to become available in the next six months as the share increased to 16.8 percent from 16 percent.

Income Expectations

The share of respondents in the Conference Board’s survey that said they expected their incomes to rise in the next half year climbed to 17.7 percent this month from 16.9 percent in September.

“Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “With the holiday season around the corner, this boost in confidence should be a welcome sign for retailers.”

Payrolls climbed 248,000 in September after a 180,000 gain the prior month, figures from the Labor Department showed earlier this month. The unemployment rate dropped to 5.9 percent, the lowest level since July 2008.

Cheaper gasoline prices also put more money in consumers’ wallets. A gallon of regular fuel at the pump cost $3.03 on average yesterday, the lowest since December 2010 and down from a 2014 high of $3.70 in April, based on data from AAA, the largest U.S. motoring group.

Upbeat Companies

Progress in the labor market is keeping Choice Hotels International Inc., which operates the Comfort, Quality, and Sleep Inn motel brands, upbeat about the business.

“The domestic economy continues to gain strength, which we believe should be a positive for the lodging industry,” Stephen P. Joyce, president and chief executive of the Rockville, Maryland-based franchise hotel company, said during an Oct. 24 earnings call. “There have been solid gains recently in household employment in September and some improvements in the labor participation rate.”

-With assistance from Kristy Scheuble in Washington.

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