U.S. consumer confidence continued to rise in late September, reaching a five-month high, driven by increased optimism following the Federal Reserve's interest rate cut.
The University of Michigan's final consumer sentiment index for September rose to 70.1 from an initial reading of 69 and August's 67.9. Data released on Friday revealed that consumers expect a 2.7% inflation rate over the next year, the lowest since the end of 2020 and down from last month's 2.8% expectation. The five-to-ten-year inflation rate expectation stands at 3.1%.
On September 18, Federal Reserve policymakers decided to cut rates by 50 basis points to prevent deterioration in the job market. The reduction in borrowing costs further supports consumer outlooks on the economy and personal financial situations.
Government data released earlier on Friday showed moderate growth in personal spending for August. Despite earlier concerns about the labor market, consumer views on unemployment improved in the following weeks, partly reflecting the Federal Reserve's rate cut decision.
Approximately 55% of respondents believe that borrowing costs will fall within the next year, a record high. "As consumers' expectations for the economy become clearer, confidence seems to be building," Joanne Hsu, who oversees the survey, stated. "However, many continue to say their expectations depend on the upcoming election results."
Consumer confidence among Democrats rose to a five-month high in September, while confidence among Republicans and independents also saw slight increases. The current conditions index climbed to a three-month high of 63.3, and the expectations index reached its highest level since April. Consumers' outlook on personal finances for the next year hit a four-month high, marking their most optimistic view on the economy since March.
