U.S. Economy Looking Brighter Buoys Spirits of Consumers, but Inflation Worries Still Loom

Consumer confidence increased for two consecutive months as the nation's collective mood improved due to lower gas prices and the hope that inflationary pressures might be receding.

A Conference Board survey released Tuesday showed that its baseline index went up to 108 this month from a revised 103.6 in August. CNN Business reported that it is the highest level since April.

The monthly survey revealed that Americans were less negative about their assessment of present conditions and their outlook for the future.

The Present Situation Index from the survey went up from 145.3 to 149.6. Based on the short-term economic outlook, the Expectations Index went up from 75.8 to 80.3.

The back-to-back monthly increases followed three straight monthly drops as U.S. households were hammered by rising prices, especially at the gas pump.

Gas Prices and Jobs Boost Consumers' Confidence Towards U.S. Economy

According to the senior director of economic indicators at the Conference Board, Lynn Franco, declining gas prices, job growth, and wages have improved consumer confidence in September.

"The present situation index rose again, after declining from April through July... The expectations index also improved from summer lows, but recession risks nonetheless persist," Franco noted.

Franco also said that the inflation worries dissipated further this month as the prices at the gas pump are now at their lowest since the year started, US News reported.

"Looking ahead, the improvement in confidence may bode well for consumer spending in the final months of 2022, but inflation and interest-rate hikes remain strong headwinds to growth in the short term," Franco added.

Prices of Most Things in the U.S. Are Still Higher Compared to Last Year

According to some metrics, the cost of most items is still much higher than it was a year ago, even though inflation seems to have moderated recently.

The government announced earlier this month that consumer prices increased 8.3% from a year ago and 0.1% from July. But the increase in "core" prices, which do not include volatile food and energy prices, continues to be concerning.

It exceeded expectations and sparked anxiety that the Federal Reserve would aggressively boost interest rates and raise the recession risk.

According to official data that came out earlier this month, core prices went up by 6.3% for the year ending in August and by 0.6% from July to August. That was primarily due to high rents, expensive healthcare, and new cars.

To slow down inflation, which has been at its highest level in four decades and has caused prices for food, rent, gas, and other essentials to skyrocket, the Federal Reserve has raised interest rates more quickly than it has in decades.

Since March, they have raised rates at the fastest pace they have in decades. The Federal Reserve raised its short-term benchmark rate last week to a range from 3% to 3.25% - the highest since early 2008.

This rate affects many consumer and commercial loans, according to ABC 10. The central bank raised rates for the third time in a row, and most experts and economists anticipate further hikes before the year is out.

Meanwhile, recent economic reports showed that the Federal Reserve's aggressive interest rate hikes to fight inflation have caused the U.S. economy to slow down. However, other studies have shown that American consumers, who are responsible for almost two-thirds of the economy, remain strong.

This article is owned by Latin Post.

Written by: Bert Hoover

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