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Virginia consumer sentiment rose substantially over the summer, according to a quarterly survey by Roanoke College that also shows much higher public expectations for inflation to subside and prices to fall.
The Virginia Consumer Spending Report released Thursday shows a 4.5-point jump in the index for consumer sentiment, compared to three months ago, when consumer sentiment fell from the previous quarter.
The survey, conducted by Roanoke College’s Institute for Public Opinion and Research, also recorded a jump of almost 7 points in consumer expectations, with 37% of participants expecting their household finances to improve over the coming year and 52% anticipating strong economic growth in the near future.
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“Consumer sentiment improved over the summer, likely buoyed by the continued settling of prices,” said Alice Louise Kassens, senior analyst at the institute and professor of economics at the college. “Consumers continue to spend, which is crucial to economic growth.”
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“Virginians’ short- and long-term price expectations are consistent with where they were before the (COVID-19) pandemic,” Kassens said on Thursday. “Things are more expensive than a year ago, but wage growth outpaces inflation, giving consumers more buying power — and they are spending.”
The rebound in consumer sentiment coincides with the annual inflation rate falling below 3% this month for the first time in nearly three years and the Federal Reserve Board leaning toward a potential cut in interest rates next month, as it begins to focus more on bolstering a weakening jobs market to prevent the economy from stalling into recession.
Powell to deliver remarks Friday
Market analysts will be listening closely to Chairman Jerome Powell after the Federal Reserve’s annual conference in Jackson Hole, Wyoming, on Friday. The central bank has been focused since March 2022 on lowering the rate of inflation, which peaked at 9.2% that June as the U.S. economy began to emerge from the pandemic. Earlier this month, the Fed left its funding rate at 5.3%, but Powell indicated then that a reduction “could be on the table as soon as the next meeting in September,” if economic data showed inflation and the job market coming into closer balance.
Job creation had remained strong, despite the Fed’s efforts to cool the economy and curb inflation, but the chairman also said he does not want to see “further cooling in the jobs market.”
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Since those remarks, the Labor Department has reported an increase in 114,000 jobs in July, which fell below market expectations and sparked fears of a stalling economy. This week, the Labor Department lowered its previous estimates for new jobs created from late last year through March by 818,000.
“A data revision on employment was expected, but it was not expected to be that high,” said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management Inc. in Richmond.
Engelke said the financial markets have already positioned themselves for a reduction in the Fed funding rate of at least a quarter-percent at the meeting on Sept. 18.
Inflation has “eased a little bit, but you’re still paying more than you were before,” he said.
Growing consumer optimism cited
The Roanoke College survey interviewed 730 Virginians — 310 by random telephone call and 420 by a “proprietary online panel” — between Aug. 12 and Aug. 16. Their responses showed gains on all three consumer indices that the institute uses to measure consumer sentiment, current conditions and expectations.
The Index of Consumer Sentiment rose from 69.8 in May to 74.2 this month. The Index of Current Conditions increased slightly from 61.3 to 62. But the Index of Consumer Expectations leaped from 75.2 to 82.
Kassens said in an interview on Thursday that growing consumer optimism was a big factor in the 2.8% growth in the gross domestic product in the last quarter, which was higher than expected.
She said the rebound in consumer sentiment reflects moderation in prices they see every day — groceries and gasoline — and shows in consumer behavior, with travel numbers up at U.S. airports.
“They wouldn’t do that if they were worried,” Kassens said.
The institute will conduct its next consumer survey in November — after the presidential election.
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Michael Martz
(804) 649-6964
mmartz@timesdispatch.com
Tracking the news
WHAT HAPPENED: A Roanoke CollegeInstitute for Policy and Opinion Research survey shows consumer sentiment increased almost 4.5 points over the summer to 74.2.
THE BACKGROUND:Inflation fell below 3.0% in July for the first time since March 2021, which may have helped consumer optimism.
WHAT'S NEXT:Federal Reserve Chair Jerome Powell is expected to deliver a policy speech Friday in Wyoming. Powell may provide clues about whether the Fed will cut interest rates to ease conditions for the economy.
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Michael Martz
State Politics Reporter
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