Consumer confidence hits highest level in six months in August

By Greg Robb

Confidence hits 103.3 despite rising concern about labor market

The numbers: The consumer-confidence index rose to 103.3 this month from a revised 101.9 in July, the Conference Board said Tuesday. That's the highest reading since February.

Economists polled by the Wall Street Journal had forecast the index to register 101 in August, up from the initial July reading of 100.3.

Key details: A measure that looks at how consumers feel about the economy right now improved to 134.4 in August from 133.1 in the prior month.

A confidence gauge that looks ahead six months also rose, to 82.5 from 81.1.

Still, worries about the labor market were also increasing.

One key metric followed by economists showed increasing labor-market weakness.

The labor-market differential - the share of respondents who report that jobs are plentiful minus the share who report that jobs are hard to get - fell to 16.4 in July from 17.1 in the prior month.

On a six-month moving average basis, a gauge of plans to purchase homes fell to a new 12-year low.

The proportion of consumers predicting a recession was well below the 2023 peak.

Big picture: Economists say that confidence might have risen due to prospects of a rate cute from the Federal Reserve and the ebbing of inflation.

Another factor could have been that Democrats were more upbeat after President Joe Biden bowed out of the White House race in favor of Vice President Kamala Harris. The University of Michigan cited the surprise shift in presidential candidates for the rise in its index of consumer sentiment in August.

At the same time, rising consumer concern about the labor market will be a red flag for economists. There is worry that nascent weakness in the labor market could potentially gain momentum.

What the Conference Board said: "Consumers were likely rattled by the financial market turmoil in early August, as they were less upbeat about the stock market. In August, 46.9% of consumers expected stock prices to increase over the year ahead, down from 50.6% in July, while 27.2% expected a decrease, up from 23.1%," said Dana Peterson, chief economist at the Conference Board.

Looking ahead: The rise in confidence, along with increasing concerns about the labor market, "suggests the prevailing thought from consumers is that the labor market and economic growth will slow, but not quite to recessionary conditions," said Daniel Vielhaber, an economist at Nationwide.

Market reaction: Stocks SPX opened lower on Tuesday, while the 10-year Treasury yield BX:TMUBMUSD10Y rose to 3.867% in early morning trading.

-Greg Robb

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08-27-24 1119ET

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