By: DailyForex.com
In most developed economies, the biggest user of economic output is the domestic market. In the USA, the world’s largest economy, approximately 70% of economic output is consumed by the domestic market. Consequently, the mood of the consumer is closely watched to give insights into future demand, but the relationship between the mood of the consumer and wider macro-economic and political factors is a complex thing. When consumers are worried about job security, they are more reluctant to spend money than in times when jobs are plentiful.
One of the most closely watched indices of consumer confidence. The Conference Board’s Consumer Confidence Index for October has come in at its most positive value for almost five (Feb 08) at 72.2, up from 68.4 the previous month. The rise in confidence has been attributed to a perceived improvement in the US job market. The level of unemployment has fallen back to 7.8% - the level when President Obama came into office. Whilst the level is high by the standard of the long-term US average unemployment figure (5.8%), it is a vast improvement over the high-tide mark of 10% which was seen in October 2009 shortly after the USA exited recession. The perception that things are getting better (at last) is what has buoyed the consumer confidence index. "Consumers were considerably more positive in their assessment of current conditions, with improvements in the jobs market as the major driver. Consumers were modestly more upbeat about their financial situation and the short-term economic outlook, and appear to be in better spirits approaching the holiday season," according to the Conference Board's Lynn Franco.
The next set of employment statistics are to be released today (Friday) and the American electorate will go to the polls on Tuesday to decide if President Obama is to be given a further 4 years to get the economy on track or whether the reins of power will be handed to his Republican adversary, Mitt Romney.