American consumers were much happier about the state of the economy in August, as worries about surging prices eased, according to a closely watched survey released Tuesday.
After three months of declines, the consumer confidence index jumped nearly eight points to 103.2 in August from 95.3 in July, The Conference Board said.
The result far surpassed the modest pickup economists had expected, as sentiment improved on the current state of the economy as well as the outlook six months ahead.
And Americans indicated they are more willing to spend, after retrenching last month, with vacation plans at the highest point this year, said Lynn Franco, senior director of economic indicators at The Conference Board.
The survey showed increased plans to buy homes, cars and appliances as well. Consumers flush with savings and government support money had been a key driver of the recovery of the world's largest economy following the pandemic downturn.
However, Franco cautioned: "Concerns about inflation continued their retreat but remained elevated."
The "improvement in confidence may help support spending, but inflation and additional rate hikes still pose risks to economic growth in the short term," Franco said in a statement.
With inflation at a 40-year high, the Federal Reserve is on an aggressive campaign to stamp out surging prices, with steep interest rate increases. And Fed Chair Jerome Powell in a speech Friday doused any hopes the central bank would ease up or reverse course any time soon, a process he said would involve some "pain" to American families.
The present situation index rose for the first time since March, while the expectations index -- which surged nearly 10 points to 75.1 --"improved from July's nine-year low, but remains below a reading of 80, suggesting recession risks continue," Franco said.
And the survey showed a bit less optimism about the labor market, with a declining share of respondents rating jobs as "plentiful."
Rubeela Farooqi of High Frequency Economics called the improvement "a positive development."
"However, in terms of consumer spending, momentum is likely to moderate as the Fed continues to raise rates over coming months," she said in an analysis.
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