The hurricanes that hit Texas and Florida in August and September caused a slight decline in consumer confidence, but the nation’s two primary gauges of the public mood remain at high levels.
The Conference Board’s Consumer Confidence Index fell slightly, to 119.8 in September, from a revised 120.4 in August, although the research association said it “decreased considerably” in Texas and Florida because those states were the ones most affected by hurricanes Harvey and Irma.
“Despite the slight downtick in confidence, consumers’ assessment of current conditions remains quite favorable and their expectations for the short term suggest the economy will continue expanding at its current pace,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.
Consumers’ assessment of current conditions moderated in September, The Conference Board said. Those who said business conditions are “good” decreased slightly, from 34.5 percent to 33.9 percent, and those who said conditions are “bad” increased from 13.2 percent to 13.8 percent.
Consumers’ optimism about the short-term outlook was somewhat better. The Conference Board said the percentage of consumers that expect business conditions to improve during the next six months rose slightly, from 19.8 percent to 20.2 percent, but those who expect conditions to worsen increased from 8 percent to 9.9 percent.
Meanwhile, the University of Michigan’s final Consumer Sentiment Index for September also slipped, to 95.1, from 96.8 in August, but remains “very favorable.”
“The resilience of consumers has again been demonstrated as concerns about the impact of the hurricanes on the national economy have quickly faded,” Richard Curtin, chief economist of the university’s Surveys of Consumers, said in a statement. “Given that the survey was able to reach most households in Florida and Texas in late September, it should be no surprise that small declines were recorded in the current financial situation of households.”
Curtin also said that during the past year “there has been a long list of issues that could have derailed the overall level of consumer confidence, including the unprecedented partisan divide, North Korea, Charlottesville and the hurricanes. Confidence has nonetheless remained very favorable, moving sideward in a very narrow positive range.”
Curtin said the index has averaged 96.2 during the first nine months of this year, just ahead of averages of 91.9 and 92.9 in the prior two years, making 2017 the highest recorded since 2000.
“While consumer resilience has lowered precautionary saving motives and increased willingness to spend and incur debt, those changes will still be constrained by slower income growth and consumers who are still more risk-averse,” Curtin added. “Overall, consumer expenditures are expected to increase by 2.6 percent in 2017 and in the first half of 2018.”
Consumer spending rose just 0.1 percent in August after rising 0.3 percent in July, the Commerce Department said. MarketWatch said the slowdown was largely attributable to weaker sales of new cars and trucks.
Hurricane Harvey was believed to have adversely affected the new-vehicle market. Economy watchers will find out how car and truck sales fared in September when the data are released today.
Personal income rose 0.2 percent in August, and inflation remained weak. The Personal Consumption Expenditures Price Index, the inflation gauge the Federal Reserve prefers to use, rose just 0.1 percent. It excludes volatile food and energy prices.
“We think current economic conditions are heavily impacted by the effect of the recent hurricanes,” Chris Rupkey, chief economist at MUFG in New York, told Reuters. “The Fed will rightly look over any soft patch for economic growth in the third quarter.”
The economy expanded during the second quarter at a pace faster than was earlier estimated, but the hurricanes are expected to curb third-quarter growth.
The nation’s gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said. The pace was the fastest since the first quarter of 2015, and it followed a 1.2 percent rate during the January-March period.
“The destruction caused by hurricanes Harvey and Irma and the resulting disruption ... are expected to be a drag on third-quarter growth,” Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Mich., told Reuters. “Nonetheless, the economy remains on track.”
Reuters also said economists estimate that Harvey and Irma could cut as much as six-tenths of a percentage point from third-quarter GDP growth.
Bloomberg said a strengthening trend in equipment spending bodes well for continued increases in business investment during the second half of the year. And Reuters said rebuilding after the storms is expected to boost GDP growth in the fourth quarter and in early 2018.
Sales of new homes slowed in August to the weakest pace since last December. The Commerce Department said sales fell 3.4 percent, to a seasonally adjusted annual rate of 560,000 units, from July, and the rate was 1.2 percent lower than in August of last year.
Reuters said the Commerce Department suggested that Harvey and Irma probably affected August sales, but the news service also said the housing market was softening before the hurricanes struck. The problems include a shortage of homes available for sale, skilled labor and suitable land for building.
“The U.S. housing market entered a strange kind of twilight zone over the summer in which home prices kept rising steadily, but actual home sales activity largely leveled off at fairly underwhelming levels,” Svenja Gudell, chief economist at Zillow, told Reuters.
Topping the economic news this week is the September jobs report, which will be issued Friday. Kiplinger said that as the labor market continues to tighten, employers are likely to find it more difficult to attract the candidates they want.
Kiplinger said job gains probably will total about 175,000 in the months ahead.