US: Consumer spending to remain a key driver of economic activity - ING

James Knightley, Senior Economist at ING, point out that the improvement in Consumer confidence registered in August influenced by the strong jobs market, massive tax cuts and buoyant asset prices.

Key Quotes: 

“The final reading of August University of Michigan consumer confidence has improved to 96.2 from the preliminary figure of 95.3 and suggests households remain very positive on their own personal situation and that of the US economy.”

“With the jobs market going from strength to strength and tax cuts putting more money in peoples’ pockets, there is a strong appetite to spend. Rising home and equity market prices are also boosting household wealth, so it is little surprise to see optimism is at such strong levels. The only thing missing is wage growth- which continues at a subdued 2.7% rate - slower than headline inflation of 2.9%. If we can see the pay story improve (we look for wage growth to pick up to 2.8% next Friday) this could see sentiment hit new record highs.”

“We expect consumer spending to remain a key driver of US economic activity.”