Rise in U.S. August consumer confidence supports spending outlook

The rise in the Conference Board's measure of US consumer confidence in August, to 101.5 from 91.0 in July, more than offset last month's fall and is consistent with consumption growth remaining healthy in the third quarter. Admittedly, the survey doesn't cover the most recent turbulence in financial markets, but the equity market has opened up anyway. 

The rise in the headline index was broad based, with the present conditions index surging in August, to 115.1 from 104.0 in July, presumably reflecting the strength of labour market conditions. The expectations sub-index also rose, to 92.5 from 82.3. At this level it is consistent with annualised consumption growth of more than 3% in the third quarter, from 2.7% in Q2, notes Capital Economics in a report on Wednesday.

 More importantly for the Fed, the proportion of respondents reporting that jobs were hard to get compared to those reporting jobs were plentiful fell sharply in August, to 0.0 from 7.5. 

"At that level it is consistent with the unemployment rate falling to 5% in the coming months, from 5.3% now, which would leave it at the bottom of the Fed's estimated range for the natural rate. Overall, the rise in consumer confidence adds to the evidence that the outlook for consumption growth in the second half of the year remains healthy. What's more, the latest fall back in oil prices will soon provide a further boost to consumer confidence", says Capital Economics.