Consumer confidence registered its second consecutive monthly gain in August, indicating that a strong basis for higher expenditure prevails. The Conference Board’s index increased to its second-highest level in 17 years. Consumers’ assessment of current conditions also surged to a record level.
Economists have attributed consumers’ new-found confidence to strong labor and equity markets. Steady increase in housing prices is also indicative of an increase in purchasing power. Economists believe that the report suggests that consumption expenditure will continue to increase in the third quarter, which makes this a good time to pick consumer discretionary stocks.
Index at Second-Highest Level Since 2000
Consumer confidence increased from the downwardly revised level of 120 in July to 122.9 in August. According to the initial estimate, consumer confidence had increased from 117.3 to 121.1 in July. This marks the second consecutive monthly increase for the index. It is also the second-highest level observed since the second half of 2000. Only in March did consumer confidence register a higher reading, of 125.6, than July.
Additionally, the Present Situation Index increased from 145.4 to 151.2, the highest level experienced since July 2001. However, the future expectations index increased only slightly, from 103 to 104. But more significant was respondents’ assessment of the labor market situation. The percentage of those who believe that jobs are “plentiful” increased from 33.2% to 35.4%. Also, the percentage of those who think positions are hard to secure contracted from 18.7% to 17.3%, the lowest point witnessed since August 2001.