Consumer confidence in the US has increased sharply and is now at its highest point since April. Earlier this week, Statistics Netherlands reported that consumer confidence also improved slightly in December, or rather, became slightly less negative.
According to the US Conference Board index, consumer confidence rose from 101.4 in November to 108.3 in December. According to economist Han de Jong, gasoline prices in America have a big influence on consumer confidence. And in recent months, oil prices around the world have fallen considerably. “In America, gasoline prices are down 15% in one month and 40% since June.”
Inflation expectations
Inflation expectations have also declined. And this is good, says De Jong, ‘Economists believe that inflation expectations play an important role in the inflation process. Central bankers are therefore suspiciously following inflation expectations.
Decrease in large purchases
Fewer large purchases are made, such as buying a new home. “No wonder,” says De Jong. “During the pandemic, people could spend less money on services and started making big purchases.” ‘This means that future purchases have been brought forward. The housing market in America, just like here in the Netherlands, has been down all year due to rising mortgage interest rates.’ The US market is even more sensitive to this; even though mortgage interest rates have recently declined.
Total spending
Of course, that’s good news consumer confidence is on the rise, but that’s no guarantee that consumer spending will actually increase. “We know that consumer confidence and consumer spending don’t react one-to-one,” says De Jong.
contradiction
Even if the increase in consumer confidence is good, ‘ma’ warns De Jong ‘If growth resumes in America and remains higher than expected, inflation will eventually remain a bit higher than hoped.’ “The Federal Reserve would then have to respond by raising interest rates even more, which in turn would play tricks on financial markets, including ours,” says De Jong.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
