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Consumer confidence in the U.S. increased four index points for the second consecutive quarter to reach a score of 108 in the third quarter—the highest level since 2006. The Nielsen consumer confidence index measures perceptions of local job prospects, personal finances and immediate spending intentions. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively.
The rise continued an upward trend that started in Q1 2013, and confidence in the U.S. has increased 15 points since then. All consumer confidence indicators measured in the survey increased in Q3, reaching levels not reported since 2007: Job prospect confidence increased 9 percentage points to 55 percent; personal finance confidence increased 2 percentage points to 66 percent; and the portion of respondents who believe now is a good time to buy increased 2 percentage points to 51 percent from Q2.
U.S. consumers are now feeling far more confident than in previous years of the recovery due to consistently good job market trends reflected in steady payroll growth and falling unemployment over the course of 2014. They are also benefiting from lower gasoline prices and a gradually improving housing market. In the coming months, as we start to see more people re-entering the workforce and meaningful wage growth, this is likely to translate into broad-based gains in consumer spending.
But the percentage of U.S. consumers who believe they are in a recession is still high at 65 percent, which was a slight improvement from 68 percent in Q2. While the decline represents good news, a recessionary mindset still lingers, which is impacting current retail sales that are on a long, slow ride to improvement.
The percentage of U.S. consumers planning to spend and save their discretionary income showed marginal changes from Q2. Intentions to buy new clothes (33 percent) and technology products (22 percent) increased 3 and 1 percentage points, respectively, while spending on home improvement projects (23 percent) and out-of-home entertainment (22 percent) declined 3 and 1 percentage points, respectively. Discretionary spending intentions were flat for holidays/vacations (31 percent). Putting money into savings accounts (42 percent), paying off debts/credit cards/loans (35 percent) and investing (16 percent) increased 2 percentage points each and saving for retirement (19 percent) rose 1 percentage point.
The economy remained a top concern for Americans, but sentiment is weakening as worries about other concerns increase. Just over one quarter of U.S. respondents (28 percent) said the economy was their biggest or second-biggest concern for the next six months, but that sentiment is down from 35 percent in the previous quarter. Other concerns that waned in Q3 include: debt (16 percent), food prices (15 percent) and fuel prices (9 percent), down 5, 6 and 6 percentage points, respectively. Conversely, fears about terrorism spiked 9 percentage points to 15 percent, concerns about war rose 5 percentage points to 9 percent and worries about work/life balance increased 2 percentage points to 11 percent.
The Nielsen Global Survey of Consumer Confidence and Spending Intentions, established in 2005, measures consumer confidence, major concerns and spending intentions among more than 30,000 respondents with Internet access in 60 countries.