Things are looking up for U.S. consumers and future growth. The October 2024 consumer confidence series from the Conference Board surged to the highest level since January. Personal spending rose significantly in September 2024. Plus, U.S. Gross Domestic Product was largely supported by consumption in the third quarter of 2024. The key to future growth will be ongoing consumption and a healthy labor market.
Consumer Confidence Gets A Lift
Good news was reported about consumers this week when the Conference Board’s Consumer Confidence Index® increased in October to 108.7 (1985=100). This was the highest reading of this critical economic indicator since January 2024, and it was up from 99.2 in September.
According to Dana M. Peterson, Chief Economist at The Conference Board, who was quoted in a press release for this report, “Consumer confidence recorded the strongest monthly gain since March 2021.”
Strong consumer confidence in October bodes well for the start of the fourth quarter, with the potential to support fourth-quarter GDP growth, holiday retail sales, and ongoing job gains.
The Importance Of Consumer Confidence
Consumer confidence is critical for economic growth because it’s the vast majority of GDP. In fact, consumption was around 68.9% of total GDP in the third quarter of 2024.
Looking deeper into the advance GDP report from the U.S. Bureau of Economic Analysis, the third quarter of 2024 seasonally adjusted annual rate of GDP in chained 2017 dollars was $23.386 trillion. Meanwhile, personal consumption expenditures for the same quarter were at a seasonally adjusted annual rate of $16.111 trillion in chained 2017 dollars.
U.S. GDP Growth Supported By Consumption
The forward-looking October consumer confidence report was accompanied by other positive consumption data this week, including September personal spending and the advance GDP report for the third quarter of 2024.
Consumer spending rose by 0.5% in September 2024, which was faster than the 0.3% pace of monthly spending in August 2024 and just shy of the 0.6% increase in July 2024 personal spending.
In the third quarter GDP report, consumption contributed 2.46 percentage points of the 2.8% GDP growth rate in the third quarter. There were strong contributions from services, which added 1.21 percentage points, and goods, which added 1.25 points.
Future Expectations
Consumption is likely to remain the vast majority of U.S. GDP, which is why a focus on labor market data will be critical for future growth expectations. After all, people with jobs are consuming and supporting economic growth. So, as long as job growth remains positive, there are reasons to be optimistic about U.S. growth in the near and medium terms.
With the Federal Reserve likely to cut interest rates further in the months ahead, the labor market is likely to continue adding more net jobs to payrolls on trend, and consumption is likely to find ongoing support.
While the U.S. consumption, economic, and labor market outlooks are generally positive, there are some downside risks. One of the few things that could quickly dampen the outlook for consumption and the labor market would be an uncertain outcome of the U.S. presidential election.
For the health of the consumer, the economy, and financial markets, the quicker the outcome of the U.S. presidential election, the better.
What do you think about the prospects of future U.S. consumption?
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