Consumers Shrug Off Inflation, Get Marginally Happier

Maybe the US consumer isn’t feeling so terrible after all.

Despite an underwhelming preliminary read on the University of Michigan’s sentiment gauge for October, a separate report suggested the consumer mood is improving.

After three consecutive monthly declines coinciding with the proliferation of the Delta variant and escalating inflation concerns, the Conference Board’s gauge rose in October. At 113.8, the headline print exceeded all estimates (figure below).

The forecast range, from 59 economists who ventured a guess, was 101.0 to 112.0.

In stark contrast (superficially, anyway) to dour readings on buying conditions in the Michigan survey, Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said that despite the highest near-term inflation concerns in more than a dozen years, more consumers said they planned to buy houses, cars and major appliances in October.

That’s “a sign that consumer spending will continue to support economic growth through the final months of 2021,” Franco remarked.

Government data out Tuesday showed median new home prices rose to nearly $409,000 in September.

Almost half of participants indicated they’ll take a vacation between now and March. That was the most since the onset of the pandemic, when vacationing became dangerous and, for a time, effectively illegal.

It’s likely the decline in COVID cases (figure below) is helping to allay concerns at the margins.

Assessments of the labor market improved, and both the present situations index and the expectations gauge ticked higher.

It’s probably not worth torturing the data or otherwise extrapolating. “The underlying message here is that confidence remains below its pre- and post-pandemic peaks, but at least isn’t deteriorating any further,” Bloomberg’s Cameron Crise remarked. “That should be good enough for a stock market enjoying another earnings party.”

Indeed.