Things are looking good for US consumers and future growth. The Conference Board’s October 2024 consumer confidence series rose to its highest level since January. Personal spending increased significantly in September 2024. Additionally, US Gross Domestic Product was largely supported by consumption in the third quarter of 2024. The key to future growth will be continued consumption and a healthy labor market.

Consumer confidence gets a boost

There was some good consumer news this week when the Conference Board Consumer Confidence Index® it rose in October to 108.7 (1985=100). This was the highest reading for this critical economic indicator since then January 2024and rose from 99.2 in September.

According to Dana M. Peterson, chief economist at Conference Boardwhich was quoted in a press release for this report, “Consumer confidence posted strongest monthly gain since March 2021.”

Strong consumer confidence in October bodes well for the start of the fourth quarter, with the potential to support fourth-quarter GDP growth, holiday retail sales and continued job growth.

The importance of consumer trust

Consumer confidence is critical to economic growth as it accounts for the vast majority of GDP. In fact, consumption was about 68.9% of total GDP in the third quarter of 2024.

Looking deeper into the US Bureau of Economic Analysis’ GDP forecast report, the seasonally adjusted annual GDP rate in the third quarter of 2024 in 2017 dollars was $23.386 trillion. Meanwhile, personal consumption expenditures for the same quarter were at a seasonally adjusted annual rate of $16.111 trillion in chain 2017 dollars.

US GDP growth supported by consumption

October’s forward-looking consumer confidence report was accompanied by other positive consumption data this week, including September’s personal spending and the advance GDP report for the third quarter of 2024.

Consumer spending rose 0.5% in September 2024, which was faster than the 0.3% pace in monthly spending in August 2024 and just below the 0.6% increase in personal spending in July 2024.

In the third quarter GDP report, consumption contributed 2.46 percentage points of the 2.8% third quarter GDP growth rate. There were strong contributions from services, which added 1.21 percentage points, and goods, which added 1.25 points.

Future expectations

Consumption will likely remain the vast majority of US GDP, which is why a focus on labor market data will be critical to future growth expectations. After all, people with jobs consume and support economic growth. So as long as job growth remains positive, there is reason to be optimistic about US growth in the short to medium term.

With the Federal Reserve set to cut interest rates further in the coming months, the labor market is likely to continue to add more net jobs to the payroll, and consumption is likely to find continued support.

While the outlook for US consumption, the economy and the labor market is generally positive, there are some downside risks. One of the few things that could quickly dampen the outlook for consumption and the labor market would be an uncertain outcome of the US presidential election.

For the health of the consumer, the economy and the financial markets, the sooner the outcome of the US presidential election, the better.

ForbesUncertainty about the outcome of the US presidential election could affect the marketsOf Jason Schenker

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