Talking Points:
- Conference Board Consumer Confidence Index reaches highest in 15 years.
- Previous month’s reading was revised higher.
- US Dollar largely unchanged on the data.
The Conference Board’s Consumer Confidence Index rose to 113.7, beating expectations of 108.8. This is the highest reading since August 2001 and follows an already high reading of 109.4. Earlier this month, the University of Michigan Consumer Confidence for November came in at 98.0, the highest reading in almost two years.
Continued signs of a strong consumer, especially during the heavy-spending holiday season, are very positive for US Q4 growth. The odd thing seen here is that, despite strong readings of Consumer Confidence for November, Retail Sales, Durable Goods both came in worse than expected as Durable Goods Orders contracted and Retail Sales were almost flat. Look later this month for consumer spending data to see if it rises with the increase in Confidence.
Increasing strength in Consumer Confidence to decade highs signals continued consumer strength in the US, which is vital to the health of the US economy. Consumption accounts for approximately 70% of GDP. Stronger consumers propelling inflation, combined with new expectations of higher fiscal spending, should continue to put further pressure on the Federal Reserve to raise interest rates sooner and potentially faster. As of this morning, markets were only pricing in two rate hikes for this year, versus the Fed’s expectations of three. The first Fed meeting with at least a 60% chance of higher rates is June 2017.
See the DailyFX economic calendar for Monday, December 27, 2016
Chart 1: USD/JPY Index 1-minute Chart (December 27, 2016 Intraday)
Following the news, the USD/JPY traded within a band of almost 2 pips around 117.54, barely reacting to the data.
--- Written by Omar Habib, DailyFX
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