WASHINGTON – U.S. consumer confidence this month reached its highest point in nearly seven years, boosted by strong job gains.
The Conference Board said Tuesday that its confidence index rose for a fourth straight month to 92.4 from 90.3 in July. The August reading is the highest since October 2007, two months before the Great Recession officially began.
The optimism suggests that Americans will be more likely to spend in the months ahead, an important boost to the economy. Consumer spending drives about 70 per cent of U.S. economic activity.
“The rise in confidence adds to other evidence that the U.S. economy is going from strength to strength,” said Paul Dales, an economist at Capital Economics.
The survey found that Americans’ outlook on the job market brightened considerably. The percentage of respondents who said jobs were “plentiful” rose to 18.2 per cent from 15.6 per cent in July. That’s the highest level since 2008. Consumers’ perceptions generally track the unemployment rate over time.
Steady and solid hiring this year has provided more Americans with paychecks to spend. Employers have added an average of 230,000 jobs a month this year, up from about 195,000 a month in 2013. Average monthly job gains since February have produced the best six-month stretch since 2006.
The unemployment rate ticked up to 6.2 per cent in July from 6.1 per cent in June. But that was because more Americans began looking for work. Most didn’t immediately find jobs, but the increase in people looking for work suggests that they are more confident about their prospects.
Lower gasoline prices have also likely helped. The average price of a gallon of gas nationwide Monday was $3.44, the lowest in nearly six months, according to AAA. That leaves Americans with more money to spend on other goods and services. This month, the percentage of Americans who said they plan to buy a car reached its highest level in five months.
Confidence bottomed during the Great Recession in February 2009 at 25.3 before beginning an upward swing. While the index still hasn’t returned to full health, it is well above last year’s average of 72.3. In the 20 years before the downturn, the index averaged nearly 102.