United States consumer confidence increased in February, with households slightly more upbeat about the labour market amid declining new COVID-19 infections and expectations for additional money from the government to help the economy’s recovery from the coronavirus pandemic.
The survey from the Conference Board on Tuesday also showed consumers warming up to overseas vacations, though fewer intended to purchase homes, automobiles and other big-ticket items over the next six months. Consumers anticipated higher inflation as well. This fits in with economists’ predictions that demand will swing back to services from goods by summer as more Americans get vaccinated, and boost price pressures.
There are concerns in some quarters that very accommodative fiscal and monetary policy will ignite inflation this year. Federal Reserve Chair Jerome Powell has played down these fears, citing three decades of lower and stable inflation.
On Tuesday, Powell told lawmakers that the US central bank would keep interest rates low and continue to pump money into the economy through bond purchases “at least at the current pace until we make substantial further progress towards our goals… which we have not really been making”.
The Conference Board said its consumer confidence index rose to a reading of 91.3 this month from 88.9 in January. Confidence remains well below its lofty reading of 132.6 last February.
Economists polled by Reuters news agency had forecast the index nudging up to a reading of 90. The cutoff date for the survey was February 11 and did not fully capture the winter storm, which knocked out electric power in Texas, or the easing of dining restrictions in New York City.
“With additional fiscal relief coming and better progress on the vaccination front, sentiment should rise further,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “As we approach herd immunity, pent-up demand will be released.”COVID-19 cases in the US have declined for the sixth consecutive week, with daily cases and hospitalisations falling to the lowest levels since before the Thanksgiving and Christmas holidays. The pace of vaccination is also picking up.
Health experts have warned, however, that coronavirus variants initially discovered in Britain, South Africa and Brazil could unleash another wave that threatens to reverse the recent positive trends. The virus has claimed more than 500,000 lives in the US just over a year since the pandemic hit the nation. President Joe Biden’s $1.9 trillion plan for recovery from the pandemic is gaining traction in the US Congress.
Stocks on Wall Street fell as investors sold off mega-cap growth shares on valuation concerns. The dollar gained versus a basket of currencies. US Treasury prices were higher.