Consumer confidence rose sharply in September to the highest level since the coronavirus pandemic began. The much-watched Consumer Confidence Index surged to 101.8 in September from 86.3 in August, the Conference Board reported Tuesday. It was the largest one-month increase in 17 years and was substantially stronger than the pre-report consensus of a rise to only 89.6.
Better yet, consumers expect the recovery to continue: The so-called Future Expectations Index surged to 104 in September from 86.6 in August. Confidence is still well below pre-pandemic levels, however; the Index stood at 132.6 before the Covid-19 outbreak, as you can see below.
Perhaps more surprising, the recent reduction in federal benefits for the unemployed did little to dampen the optimism. The $600 per week in extra federal stimulus for families which qualified expired at the end of July. President Trump authorized temporary $300 payments, but the money is already running out and Congress is deadlocked on what to do next.
Despite rising Covid-19 infections, stalled negotiations on another federal stimulus package on Capitol Hill and a slowing jobs recovery, Americans are increasingly optimistic about the short-term business outlook, the job market and their financial prospects.
Consumer spending accounts for over two-thirds of Gross Domestic Product, so how people feel about this recovery is a very important piece of the puzzle, as the country tries to get back to normal. Let’s hope this rebound in confidence continues!
2Q GDP: Final Estimate Shows Little Change
Speaking of Gross Domestic Product, the Commerce Department released its third and final estimate of second quarter GDP yesterday morning. The government reported that 2Q GDP plunged at an annual rate of -31.4%, less ever so slightly from the -31.7% reported in late August.
The good news is the US economy roared back in the 3Q which just ended. Most forecasters are predicting that GDP soared at an annual rate of apprx. 30% in the 3Q. We won’t see the first official estimate of 3Q GDP by the Commerce Department until October 29.
Most forecasters predict 4Q GDP will rise by 4-5% (annual rate). We won’t get our first glimpse of 4Q GDP until the end of January next year.
US Household Wealth Hit New Record High in 2Q
Americans’ household wealth rebounded last quarter to a record high as the stock market quickly recovered from the pandemic-induced plunge in March. Yet the gains flowed mainly to the most affluent households even as tens of millions of people endured job losses and shrunken incomes.
The Federal Reserve reported last month American households’ net worth jumped nearly 7% in the April-June quarter to $119 trillion. That figure had sunk to $111.3 trillion in the first quarter, when the coronavirus battered the economy and sent stock prices tumbling.
The full recovery of wealth even while the economy has regained only about half the jobs lost to the pandemic recession underscores what many economists see as America’s widening economic inequality. Data compiled by Opportunity Insights, a research group, show that the highest-paying one-third of jobs have almost fully recovered from the recession, while the lowest-paying one-third of jobs remain 16% below pre-pandemic levels.
The wealth data “highlights the inequalities in the recovery in the sense that high-income workers not only have jobs that for the most part have come back; they also have savings that have continued to grow,” said John Friedman, an economist at Brown University who is co-director of Opportunity Insights.
The richest one-tenth of Americans owned more than two-thirds of the nation’s wealth, according to Fed data through the end of March, the latest period for which figures are available. The top 1% owned 31% of all wealth in the country.
I will revisit the issue of income inequality in more detail just ahead.
Thoughts On The Presidential Debate
In a word, I thought the debate on Tuesday night was a trainwreck… for ALL parties involved! I thought President Trump was unnecessarily overbearing and rude. I thought Joe Biden was underwhelming, but the bar for him was incredibly low, so he did OK.
The real loser in the debate was the moderator, Chris Wallace, who I previously respected. Wallace, a registered Democrat, was clearly biased toward Mr. Biden. At one point, Trump complained that he was debating BOTH Biden and Wallace, and I believe he was correct.
Based on early polls and reviews of the debate which I have seen, it appears President Trump prevailed in the debate – but just barely. However, one article I read had Mr. Biden ahead by a nose. For me, there was no winner. Let’s hope they all do a better job at the next debate!
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