US consumer confidence jumps on stimulus, vaccine hopes

While the confidence index remains well below pre-pandemic levels, widespread vaccination programmes and additional stimulus funds could shore up sentiment.

United States consumer sentiment improved following the passage of $900bn in coronavirus relief aid and President Joe Biden's proposal of an additional $1.9 trillion [File: David Paul Morris/Bloomberg]

U.S. consumer confidence rose in January as Americans grew more upbeat about the outlook for the economy and job market in light of further fiscal aid and the distribution of coronavirus vaccines.

The Conference Board’s index of sentiment increased to 89.3 from a revised 87.1 reading in December, according to a report on Tuesday. The median forecast in a Bloomberg survey of economists called for a reading of 89.

The gauge of expectations rose to a three-month high of 92.5, while a measure of sentiment about current conditions decreased to 84.4, the worst reading since May.

The overall improvement in sentiment follows last month’s passage of a $900 billion aid package and coincides with a proposed $1.9 trillion in additional stimulus. While the confidence index remains well below pre-pandemic levels as the health crisis prompts tighter restrictions on activity, a more widespread roll out of the vaccine and additional financial assistance could shore up sentiment.

“Consumers’ appraisal of present-day conditions weakened further in January, with Covid-19 still the major suppressor,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement. “Consumers’ expectations for the economy and jobs, however, advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future.”

The number of Americans that said jobs were currently hard to get increased to the highest level since May, underscoring a rocky labor market. The cutoff date for the preliminary results was Jan. 14.

Still, the share of survey respondents who said better business conditions in the next six months increased to a three-month high of 33.7% from 29.5%. The share anticipating more jobs during that period climbed to 31.3%, also the highest since October.

At the same time, a little more than two-thirds see their incomes remaining flat in the next six months, while the rest of respondents were about evenly split on whether their wages will rise or fall.

Respondents indicated they were more likely to make big purchases in the months ahead. The share expecting to buy a new car increased to 10.7% from 9.8%, and more said they intended to buy a home.

Source: Bloomberg