onsumer spending growth remains robust. In fact, consumers are saving money due to the reduction of gasoline prices and increased access to online shopping. Gasoline prices have decreased about $1.50 a gallon since June. This means that consumers have more money available to spend. And this cash flow is being used to purchase necessities such as clothing, food, and household items.
Homeowners are also taking advantage of this weather-friendly economy. They are refinancing and improving their homes. Home equity lines of credit are paying off because they are not only paying down the mortgage but also are increasing the homeowners’ net worth. Consumers are also utilizing lines of credit to finance vacation travel. Vacation packages are selling like hot cakes. These travelers are not only getting a break from their regular jobs but also are boosting their disposable income by taking advantage of these low-cost holiday packages.
Homebuilders are reporting brisk sales in January, February, and March. Spring builders are having a fantastic time selling their houses during this period of the year. The timing of sales has everything to do with the current state of the economy. In short, consumers are not pulling their punches when it comes to spending. They have more money and are ready to buy now.
Consumer confidence is at an all-time high as consumers are starting to feel the pull of the recovering economy. Consumer sentiment is considered one of the most reliable economic indicators. According to the Economic Confidence Survey, released in January, the index rose at its fastest pace in nearly two years. The survey found that more than half of the survey respondents indicated a “very good” or “moderately good” feeling about the economy.
The index’s gauge, the Purchasing Managers Index, climbed at its fastest since early 2006. Survey participants indicated a slight decrease in consumer sentiment in November, indicating a possible start of a recovery in the economy. Consumer confidence indexes are influenced by several economic indicators. Economic indicators such as unemployment and inflation can negatively impact consumer confidence. However, consumers are also expecting better paychecks due to the weak economy. This view is partially responsible for the index’s recent climb.
A recovery in the economy is expected to increase employment. Survey participants were also uncertain about the direction of job growth. Employment levels have been rising for several years. Inflation is likely to remain in the current economic indicators suite. However, the index suggests the Federal Reserve will probably wait for a sustained rise in inflation before raising interest rates. As such, investors should expect a softening of financial conditions.
According to survey estimates, manufacturing activity edged lower in November. While indicators suggested factory activity in the US picked up slightly in November, new orders fell 3%. The non-farm payrolls report will be released tomorrow. The index indicates the economy has improved its performance versus expectations over the