Consumer Confidence Gains in August

The US consumer confidence has risen to 10.5 points in August, hitting its highest level in 7 months while the Conference Board's consumer index reached 101.5 this month.

Consumer confidence is an indicator which gauges how consumer understands the present economic environment and their expectations as well for the future.  A decrease in consumer expectations can be a leading indicator of slowing economic activity.

Purchase for durable goods or durables in the US are those that need not be purchased oftentimes because they are made to last longer and had increased by 2% in July.  It was elevated mainly by orders for new cars, trucks, and military hardware. 

The increase last month was unexpected because it was more than experts had predicted.

The July reading was revised to 91.0 from 90.9.

A reading on the present situation for U.S. consumers hit 115.1 in August which is the highest since November 2007 as compared to the revised reading of 104.0 in July.

The report's "jobs hard-to-get" index dropped to 21.9 versus the upwardly revised figure of 27.4 last month.

According to Chris Rupkey, chief financial economist at MUFG Union Bank in New York, "This is evidence of the 'some further improvement' in the economy that the Fed is waiting to raise rates.  They are so close they need just a little more confirmation." 

Although sentiment could retreat in September, an economist said any decline was likely to be modest.  A strong labor market, lower gasoline prices and an improving housing market also are seen supporting consumer confidence.

"We think that the Fed will not raise rates in September, they need a little time to digest what has happened and we think they will raise in December," said Chris Christopher, an economist at IHS Global Insight in Lexington, Massachusetts.  "Prior to Friday, we thought that the Fed would raise rates in September."