Confidence among U.S. consumers rose in October to a seven-year high as gasoline prices dropped and the job market improved.
The Conference Board’s index climbed to 94.5 this month, the highest since October 2007, from a September reading of 89 that was stronger than initially estimated, the New York-based private research group said. The median forecast of economists surveyed by Bloomberg projected a reading of 87.
More job security, declining gasoline prices, and a strengthening labor market are setting the stage for a stronger expansion. Bigger wage increases and a reduction in long-term unemployment would help keep sentiment improving and lay the groundwork for gains in spending, which makes up almost 70% of the economy.
“The consumer really has the wind at their backs,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “The consumer at this point seems to have the wherewithal to power the economy forward.”
Other reports show home prices rose in the 12 months ended in August at the slowest pace since November 2012. The S&P/Case-Shiller index of property prices in 20 U.S. cities climbed 5.6% from the same month last year. Nationally, prices increased 5.1%.
Orders for durable goods dropped unexpectedly in September on waning demand for machinery and computers, figures from the Commerce Department showed. Bookings for goods meant to last at least three years decreased 1.3% after declining 18.3% in August. The median forecast of 83 economists surveyed by Bloomberg called for a 0.5% gain.
Estimates for consumer confidence in the Bloomberg survey of 77 economists ranged from 82 to 91.5 after a previously reported September reading of 86. The Conference Board’s measure averaged 96.8 during the last expansion and 53.7 during the recession that ended in June 2009.
The Conference Board’s gauge of consumer expectations barometer for the next six months jumped to 95 from 86.4. The index of present conditions rose to 93.7 from September’s 93.
The report corroborates other readings on sentiment. The Thomson Reuters/University of Michigan preliminary October gauge also climbed to the highest level in seven years, while the weekly Bloomberg Consumer Comfort Index recently matched the second-highest level since August 2013.
The Conference Board’s data showed Americans’ assessments of current and future labor-market conditions improved. The share of Americans who said jobs were currently plentiful rose to 16.5% from 16.3%. The share who said jobs were hard to get fell to 29.1, the lowest since May 2008, from 29.4 in September.
A greater number of consumers expected more jobs to become available in the next six months as the share increased to 16.8% from 16%.
The share of respondents in the Conference Board’s survey that said they expected their incomes to rise in the next half year climbed to 17.7% this month from 16.9% in September.