U.S. consumer confidence has reached a record high, according to the Conference Board. In November, it reached 111.7, the highest level since 2023. This is the second consecutive increase since September, indicating positive momentum for the U.S. economy as the year ends. Consumption plays a crucial role in U.S. economic growth, as shown by the Q3 GDP reading.
The timing of this boost in consumer confidence is ideal, as it coincides with the holiday season, a time known for increased spending. This positive sentiment among consumers could lead to a significant uptick in economic activity in the final months of the year. However, despite this improvement, expectations for a potential interest rate cut by the Federal Reserve at the end of the year have not changed significantly. The likelihood of a 25-basis-point cut is around 53%, showing a market that is still divided on the future of monetary policy.
Recent economic data suggests that the normalization process could be completed as early as the first half of 2025. This could have implications for the U.S. dollar, as a shorter normalization period, combined with deeper rate cuts in other economies, could benefit the USD through a wider rate differential. This environment may continue to favor the dollar over other global currencies.
In conclusion, the rise in U.S. consumer confidence could serve as a catalyst for the economy as we approach the end of 2024, particularly during the holiday season. This could create a positive economic environment where significant rate cuts in the coming year may not be necessary.
