The report, which was published Friday, also suggests that there is strong domestic demand, and consumer confidence is back on track. Analysts are confident that the sentiment is robust enough to back further economic growth and offset losses in trade and manufacturing sector.
U.S. economic growth, which was slowed in recent months, heavily relies on consumer sentiment; about two-thirds of the nation’s economic activity is based on the indicator.
Although last month the sentiment was at 87.2, in early October it rebounded to a more optimistic reading of 92.1. And the current conditions sub-index rose, as well, by 5.5 points from 101.2 in September.
Analysts said that the consumer spending growth will continue to rise by 4 percent this year as it did in previous years. Millan Mulraine at the New-York-based arm of the financial services provider TD Securities explained that consumer sentiment heralds further consumer spending growth despite low-performance recorded in other economic sectors.
Economists believe that the positive reading of household sentiment is directly linked to cheaper gas prices. According to a recent survey, consumers haven’t been so optimistic about their financial expectations in more than eight years.
Many consumers also said that they plan to invest in long-lasting manufactured products in the coming months. This may reboot the manufacturing sector which experienced a downfall due to weak global growth and strong currency. A strong dollar reduced foreign consumers’ appetite for U.S.A.-made goods.
On the other hand, U.S. economic growth was slowed down by low oil prices since investors showed low interest in the energy sector, so the industry had to reduce its inventories.
The news that the U.S. consumer sentiment makes a comeback in early October made traders feel more bullish on Friday since stocks traded higher, despite a apike in the U.S. currency.
According to another report, industrial production was reduced by 0.2 percent in September. Nevertheless, production continued to rise in Q3 by 1.8 percent. Economists said that the poor performance in the industrial sector would not influence economic growth because service sector remains strong.
Analysts believe that the slowdown in manufacturing is due to weak foreign demand and retail sales. These factors combined with soft employment readings led to a slowdown in economic growth despite a 3.9 percent expansion in Q2.
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