Americans' feelings about business and labor market conditions have jumped to their highest level in two years, according to the latest Consumer Confidence Survey from The Conference Board. The results could be a boost to President Joe Biden who has struggled to convince voters that he is best suited to manage the economy.
The Consumer Confidence Index released on Tuesday by the business research non-profit went up in January to nearly 115 from December's rate of 108, with the latest reading being at its highest level since December 2021.
"January's increase in consumer confidence likely reflected slower inflation, anticipation of lower interest rates ahead, and generally favorable employment conditions as companies continue to hoard labor," Dana Peterson, chief economist at The Conference Board, said in a statement.
The improvement in sentiment cut across age groups but saw its highest jump among Americans aged 55 and over, according to the survey. The survey is a monthly study that provides a read on consumer attitudes and expectations for inflation, stock prices, and interest rates. It captures the data by age and income, across nine regions and eight top states, according to the Consumer Board.
"Assessments of the present situation rose in January, buoyed by more positive views of business conditions and the employment situation," Peterson said.
Meanwhile, consumers who say their financial conditions are 'good' increased while those saying they are 'bad' fell, according to the latest survey.
"This suggests consumers are starting off the year in good spirits about their current finances," Peterson said.
The survey results come amid Americans feeling generally lukewarm towards President Biden's handling of the economy. A December poll from Monmouth University found that 68 percent of Americans disapprove of his performance on inflation while 53 percent felt the same way about his handling of jobs and unemployment.
However, the survey readings appear to align with similar surveys that suggest that Americans are feeling slightly more optimistic about the economy compared to a few months ago. Earlier this month, the University of Michigan's consumer survey showed that positive consumer sentiment jumped to its highest since July 2021.
"With the U.S. economy surpassing all expectations, consumer confidence surged to a two-year high in January—the third monthly increase in a row," National Economic Advisor Lael Brainard said in a statement shared with Newsweek. "Under President Biden's agenda for growth, consumer sentiment is turning the corner—reflecting the increase in wealth, wages, and employment relative to pre-pandemic, and the decrease in inflation to two percent over the past half year."
In the fourth quarter of 2023, the economy accelerated at a better-than-expected 3.3 percent as consumers spent billions to fuel the growth. Wages are higher and employers are still recruiting and retaining workers.
On Tuesday, the U.S. Bureau of Labor Statistics revealed that job openings last month rose to more than 9 million vacancies, the highest since October, with few layoffs, suggesting a still-strong job market.
"Solid consumer demand drove firms to increase job openings in December," Jeffrey Roach, chief economist for LPL Financial, said in a note.
These dynamics have economists believing that the economy, which has been in the midst of elevated interest rates instituted by the Federal Reserve to battle soaring inflation, may escape a recession even if it may be sluggish in 2024.
Analysts suggest that a soft landing, the scenario that high-interest rates will help moderate inflation without damaging the economy, was in view. This development, they expect, may lead the central bank to begin cutting rates this year, which could buoy the economy.
Part of the explanation for why consumer confidence jumped in January was in anticipation of those rate cuts, said Roach.
"Consumer confidence in January rose the highest since December 2021, reflecting the exuberance that the Fed is done hiking rates and will soon cut rates throughout 2024," he said.
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Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
