WASHINGTON (AP) — U.S. consumer confidence rebounded strongly in October, hitting a seven-year high as solid job gains raised expectations for economic growth.
The Conference Board said Tuesday that its confidence index climbed to 94.5, the strongest reading since October 2007 and the start of the Great Recession a few months later. This month's gains reversed a revised decline to 89 in September from 93.4 in August.
Job gains and falling gasoline prices have helped to improve sentiment, despite muted economic growth in Europe and China that has fueled volatility in financial markets.
Consumer confidence has been trending higher from lows during the worst downturn since the 1930s. However, confidence still lags pre-recession highs more than five years into the recovery.
"At 94.5, the Conference Board index is up significantly from 73.2, on average, in 2013 and 67.1 in 2012," noted Jim O'Sullivan, chief U.S. economist at High Frequency economics.
Steady hiring and fewer layoffs over the past 12 months have pushed unemployment lower. Employers added 248,000 jobs in September, helping to push the unemployment rate down to 5.9 percent from as high as 7.2 percent at the beginning of the year. The new jobs mean more paychecks, which should lead to more spending and overall economic growth.
Economists project that the gains should continue into October with the addition of 235,000 more jobs, according to the data firm FactSet.
The recent hiring has left more people optimistic about getting a raise. The Conference Board found in the survey for its confidence index that 17.7 percent of consumers expect their incomes to improve, compared to 16.9 percent in September. Meanwhile, the share of Americans expecting their income to drop fell to 11.6 percent from 13.4 percent.
Also, Americans are likely feeling less depleted after a trip to the gas pump. Average gas prices have fallen 31 cents in the past month to $3.03 a gallon, according to the AAA's Daily Fuel Gauge Report, freeing up cash to spend elsewhere.
Still, shopping has yet to accelerate, according to the Conference Board results.
"Plunging gas prices, strong job growth, and rising confidence should provide support for consumer spending in coming months, but for now the buying plans portion of the survey showed high levels of cautiousness continuing," said Morgan Stanley analyst Ted Wieseman in a client note.
Purchases of clothing dropped 1.2 percent last month and spending on building materials fell 1.1 percent, while auto-buying dipped after surging in August, the Commerce Department reported.