U.S. consumer confidence improves significantly in August, spending growth likely to be strong in Q3

The U.S. consumer confidence index of Conference Board recovered considerably in August. The levels show that consumers in the country anticipate the economy to remain strong in the second half of 2016. The Conference Board’s index rose to 101.1 in August from July’s 96.7. This is well above the consensus projections of 97. The present situation index and consumer expectations both rose to 123 and 86.4 respectively.

“Consumers’ assessment of both current business and labor market conditions was considerably more favorable than last month. Short-term expectations regarding business and employment conditions, as well as personal income prospects, also improved, suggesting the possibility of a moderate pick-up in growth in the coming months”, said Lynn Franco, Director of Economic Indicators at The Conference Board.

The labor market differential that gauges the net share of consumers that saw employment as plentiful rose to 2.6. Improvement in consumer sentiment usually shows that more people are ready to spend. As consumer spending contributes over two-thirds to the US economy, the increase in sentiment probably hints at economic growth.

The August data implies that consumer sentiment has totally recovered from the April’s and May’s weal patch. This rebound is helpful for the third quarter spending growth, noted Barclays in a research report. Even if the Conference Board survey appears to be considerably more positive than the University of Michigan’s August reading, both surveys are viewed as in line with an upward trend in consumer sentiment since the weakness in spring. This can be taken as a further evidence of the strength of US consumer, added Barclays.