Breaking News

US consumer confidence surges in August to 18-year high

The US economy also recorded its strongest economic growth since 2014, according to revised second quarter figures

The US economy recorded its strongest economic growth in nearly four years in the three months to the end of June, according to revised figures.

Gross domestic product increased at a 4.2% annualized rate, the commerce department said on Wednesday after revising its second-quarter calculations, establishing the quarter as the strongest in terms of growth since late 2014.

Sign up to receive the top US stories every morning

After the initial calculation of 4.1% was announced in July, Donald Trump hailed the figures as an economic turnaround of historic importance.

On Wednesday, the US treasury department attributed the revisions to higher levels of spending by businesses on software and a decline in imports, including petroleum.

Balanced out against out against GDP numbers for previous quarters, the revision puts the US economy on track to hit the Trump administrations target of 3% annual growth.

But economists warn that the growth is unlikely to be sustained as the quarter reflected unique boosters, including Trumps $1.5tn tax cut package, which helped tweak consumer spending upwards, and revenue from soya bean exports to China ahead of raised tariffs coming into effect.

Economists had expected second-quarter GDP growth would be revised down one-tenth of a percentage point to a 4% pace in anticipation of Trumps America First policies, including tit-for-tat tariff hikes between the US, China, the EU, Canada and Mexico coming into effect.

On the downside, growth in consumer spending was lowered to 3.8% in the second quarter instead of the previously reported 4%.

But the trends may be reversed in the coming months.

The US Conference Board, which measures consumer confidence, a solid indicator of consumer spending which accounts for two-thirds of US economic activity, said its confidence index had hit its highest level since October 2000.

The index climbed to 133.4 in August, despite expectations from a survey of Reuters economists that it would fall to 126.7, as consumers reported short-term economic optimism.

These historically high confidence levels should continue to support healthy consumer spending in the near term, said Lynn Franco, director of economic indicators at the Conference Board.

The rise in consumer confidence comes as US stocks hit record highs after a six-month climb back from Februarys market correction the S&P 500 index has jumped 3% in the past two weeks.

Trump tweeted to trumpet the news: Consumer confidence pops in August to highest level since October 2000.

A plentiful job supply, coupled with a rise in the percentage of US households describing current business conditions as improving to 40.3%, from 38.1% a month earlier, are key components for the overall rise in consumer confidence.

In a note to clients, Jim Baird, chief investment officer at Plante Moran Financial Advisors, noted that consumer optimism suggests a degree of skepticism about trade, inflation or anything else knocking the economy off track.

Baird warned however that consumers may be caught by surprise should any of those develop into a larger problem.

Leave a Reply

Your email address will not be published. Required fields are marked *