Consumer Confidence Report Easily Beats Expectations

Despite stock market volatility and escalating trade tensions, the consumer confidence report from the Conference Board did not give back very much of July's gain at all in August, easily beating high-end expectations with a 135.1 showing versus a revised 135.8 in July. The present situation component, in fact, jumped more than 6 points to 177.2 and a 19-year high. What weakness there is in today's report is on the expectations side, down more than 5 points but at a still strong 107.0.

Forecasters watch one particular sub-component on the present situation side of this report which is jobs-hard-to-get, and this improved to 11.8 percent from 12.5 percent last month. Along with the decline in unemployment claims this month as reported by the Labor Department, jobs-hard-to-get point to solid if not strengthening results for the August employment report. And to further underscore the strength of August's labor market, those saying jobs are currently plentiful jumped 4.6 percentage points to 51.2 percent.

What jitters there may be are reserved for expectations which are moderately less optimistic than July. Slightly fewer see more jobs opening up six months from now and slightly more see fewer jobs ahead. Yet income prospects held mostly steady which is a key positive on the expectations side.

One area that is clearly showing some cracks is the outlook for the stock market where the separation between bulls and bears has narrowed sharply, from a 41.3 percent versus 22.3 percent spread in July to a 36.3 to 30.5 percent spread in August. And, following the Federal Reserve's rate cut last month, many more consumers seen interest rates generally moving lower 12 months from now, at 27.3 percent versus 15.9 in July and as few as 6.7 percent back in March this year.

Inflation expectations also show movement and sharp upward movement at that, 4 tenths higher to 5.0 percent for this report's year-ahead reading which is the second strong result in three months. If confirmed by other indications, stronger inflation expectations could begin to limit expectations for further Fed rate hikes.

Today's report is surprisingly robust and contrasts not only with forecaster expectations but with the rival consumer sentiment index from the University of Michigan which fell very sharply in its mid-month report for August. Yet the methodological focus of the confidence report is the jobs market and today's results -- specifically for August's conditions -- point to yet another month of strong payroll growth.