Source: Jin10 Data
Author: Zhu Yu
Analysts point out that as long as inflation in the usa remains within a manageable range, the Federal Reserve can almost completely focus on the labor market, which means cutting interest rates!
USA consumer confidence continued to rise in late September due to optimistic economic outlook, reaching the highest point in five months, partially influenced by the positive effects of the Fed's rate cut.
The final value of the University of Michigan's September confidence index rose to 70.1, higher than the initial value of 69 announced earlier this month. The latest data released last Friday showed the index for August was 67.9.
Consumers expect prices to rise at an annual rate of 2.7% in the next year, the lowest level since the end of 2020, lower than the previous month's expectation of 2.8%. They believe inflation will rise 3.1% in the next five to ten years.
The improvement in confidence is related to the Fed's decision on September 18 to cut interest rates by 50 basis points, aiming to prevent deterioration in the job market. Further lowering borrowing costs helps support consumers' views on the economy and their personal financial situation.
Earlier this week, government data showed a slight increase in household spending in August.
Despite some concerns about the labor market shown in the early-month expectations, consumers' views on unemployment have improved in the following weeks, according to a report from the University of Michigan. This to some extent reflects the Fed's decision to cut interest rates.
About 55% of respondents expect borrowing costs to decrease in the next year, the largest proportion on record. This has led to improved perceptions of purchasing big-ticket items and homes, making it the most optimistic outlook since April.
"As consumer expectations for the economy become more optimistic, confidence seems to be gaining some momentum," said survey director Joanne Hsu in a statement. "At the same time, many consumers continue to report that their expectations depend on the upcoming election results."
Consumer confidence among Democrats in September rose to its highest point in five months, with confidence among Republicans and independent voters also slightly increasing.
The University of Michigan's index rose to a three-month high of 63.3, while the expectations index climbed to its highest level since April.
Consumers' outlook on their financial situation reached a four-month high in September. Their view of the economy for the next year is the most optimistic since March.
Furthermore, the Personal Consumption Expenditures Price Index (PCE), favored earlier by the Fed, showed a cooling inflation. According to Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, based on Friday's PCE data, inflation in the USA appears to be receding, which is a positive development for the market.
The PCE report shows that U.S. inflation edged up by 0.1% in August, with its year-over-year rate slowing from 2.5% in July to 2.2%.
Zaccarelli said in Friday's email commentary: "As long as inflation remains within a manageable range - which is currently the case - the Federal Reserve can almost entirely focus on the labor market, indicating a tendency to cut interest rates. With the Federal Reserve cutting rates - especially in the absence of recessionary growth - this will be a strong tailwind for the stocks and bonds market, ultimately providing some relief for consumers who are more sensitive to interest rates."
Editor/Jeffy
