Consumer confidence as reported by the University of Michigan survey posted a better-than-expected rise to 70.2 in September. Economists polled by Bloomberg had expected the index to increase for the first time in three months at a smaller clip to 67.5 from 65.7. Looking deeper in the release, conditions improved sharply to 71.8 from 66.6 while the outlook climbed to 69.2 from 65.0 Inflation expectation in the five years ahead rose slightly from 2.8% to 2.9%.
Ultimately, confidence may help to affirm the hope that spending will pick up in the second half of the year. Recent signs this week may be showing this fact as oil inventories plunged sharply while the trade balance deficit widened on increasing import demand. Despite such indicators, oil demand remains less elastic to spending habits than other goods. Cracks remain as the savings rate is expected to climb, while credit extended to consumers continued to drop in July for the 9th time in the past ten months. Retail sales for August to be released next Tuesday echo the concern as economists remain pessimistic. Advance retail sales may climb 1.8%, according to a consensus of 34 economists, while core sales, which exclude automotive and gasoline demand, may rise only 0.1%.
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