23 October 2018
Home price gains have fueled rising household wealth and increased consumer confidence. Photo: Reuters
Home price gains have fueled rising household wealth and increased consumer confidence. Photo: Reuters

US consumer confidence hits 16-year high

US consumer confidence surged to a more than 16-year high in March amid growing labor market optimism.

The goods trade deficit narrowed sharply in February, indicating the economy was regaining momentum after faltering at the start of the year, Reuters reports.

The Conference Board said its consumer confidence index jumped 9.5 points to 125.6 this month, the highest reading since December 2000.

The economy’s strengthening fundamentals were underscored by other data on Tuesday showing further increases in house prices in January.

Robust consumer confidence and rising household wealth from the home price gains suggest a recent slowdown in consumer spending, which has hurt growth, is likely temporary.

“We think that real consumption will firm moving forward,” said Daniel Silver, an economist at JP Morgan in New York.

“It looks likely that the recent spending data were held down by some temporary factors related to unusually mild weather and a delay in tax refund issuance.”

Consumers’ assessment of both current business and labor market conditions improved sharply in March.

They also anticipated an increase in their incomes. The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the strongest since 2001.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report. It is consistent with continued reduction in slack in the labor market, which is near full employment.

The dollar rose against a basket of currencies, while prices for US government bonds fell slightly. Stocks on Wall Street were trading higher, with Dow Jones industrial average on track to snap an eight-day losing streak.

Both consumer and business confidence have surged in the wake of Donald Trump’s victory in last November’s presidential election. The Trump administration has pledged to pursue business friendly policies, including tax cuts and deregulation.

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