U.S. consumer confidence was at a five-month high in December. Interestingly, last-minute Christmas shopping isn’t the reason. Instead, overall good signs about the economy, boosted by relatively lower prices and a steady upswing in company hiring practices have helped set a good mood and improve consumer confidence.
U.S. consumer sentiment rose in December to its highest level since July. Aspects such as lower inflation rate and steady recruitment drives, significantly boosted the average American’s purchasing power. Additionally, it appeared Americans were doing well on the professional front, as well. Personal income of an average American rose for the eighth straight month in November, reported MSN.
Owing to promising and persistent wage gains, U.S. consumers have increased their spending and in turn, are helping the economy stay buoyant. What’s even more encouraging is the prediction that consumer euphoria and spending capacity as well as intention to spend will remain high well into the next year.
The University of Michigan’s consumer sentiment index rose to 92.6. It was 91.3 in November. Though the numbers are promising, the consumer sentiment isn’t as high as last year. In 2014, the index had settled on 92.9, which incidentally was the highest annual average in 11 years, reported Yahoo.
Why are consumers in the U.S. spending more? The Commerce Department’s Bureau of Economic Analysis has inadvertently shared that incomes had increased 0.3 percent last month after an unrevised 0.4 percent rise in October. Overall, salaries rose half a percent across America, which accorded a little more liquidity to families. Consumer moods remained happy because of a steady uptick in recruitment drives. America now boasts a rather impressive unemployment rate of just five percent. Such a low rate of people without jobs was historically only prevalent in the late 1990s.
Apart from recruitment, businesses appear to be increasing wages. Companies seem to reason that better pay attracts workers and helps retain them for a longer duration. From a statistical perspective, the half percent rise in salaries is allowing consumers to spend a little more this holiday season.
Interestingly, there has been another reason that consumer sentiment is high in the U.S. There are strong signs that the exploitative labor market is on the decline. It seems more Americans are receiving steady employment instead of the per-day-wages hiring practice that did not extend the benefits of full-time jobs.
Incidentally, the gas prices have been unusually low this year. The fact that Brent Crude is hovering at $37 instead of $110 last year, has allowed Americans limit their spending on fuel costs.
The Michigan survey revealed that Americans have been responding exceptionally well to low prices. U.S. citizens are way more optimistic about their inflation-adjusted incomes as compared to any time since 2002. Though the gains are quite modest, it is the overall positive sentiment that is responsible for the euphoric buying activities.
The report indicated inflation has risen by just 0.4 percent in the last year. Such low inflation rates have caused a significant upswing in consumer attitude. They are much more inclined to execute their long-dormant plans to purchase big-ticket items like cars and houses. Apart from rising sales of household appliances, low inflation has insured the inclination to pull the trigger on big-ticket items is the highest observed in over a decade.
Federal policymakers recently raised the short-term interest rate for the first time in almost a decade. Interestingly, the decision was taken because the Federal Reserve is confident that inflation may inch closer to 2 percent over the next couple of years.
The only downfall of the rising consumer confidence in December was the noticeable dip in savings. America’s savings fell to $747.6 billion, which is still considered a healthy amount by experts.
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