When consumers have confidence in the market, they tend to spend more on a variety items, from automobiles to alarm clocks.
As a result, businesses selling such commodities aggregate more capital, giving them the opportunity to invest materials necessary for them to conduct operations. Possessing greater resources allows enterprises to procure tangible marketing assets, business forms and other printed materials that keep companies running.
The numbers speak the truth
The Conference Board recently released the results of its Consumer Confidence Survey, which is based on an algorithm that exercises random probabilities. The Consumer Confidence Index is divided into two parts, one considering peoples' outlook on the present economic situation and the other regarding individuals' anticipations.
- The Present Situation Index grew from 80.3 in May to 85.1 in June
- The Expectations Index increased from 83.5 in May to 85.2 in June
Although these gains may appear marginal, a steady, month-to-month rise in spending morale is sure to spawn favorable economic results in the long run. For example, if the PSI rating increased by 4.8 points over the next five months, the rating would stand at 107.5 in November of this year.
What's sustaining this growth?
As opposed to analyzing how much money people are doling out on a regular basis, it's important to regard what they're spending their cash on. Are consumers purchasing necessities or luxuries?
PYMNTS.com referenced MasterCard's May SpendingPulse report, which found that individuals are consistently paying for frivolities such as jewelry and dining at restaurants more frequently now than they were a couple of years ago. MasterCard Advisors Senior Vice President for Market Insights Sarah Quinlan discussed the matter with Market Platform Dynamics CEO Karen Webster.
"The consumer is having the confidence to continue to spend, and that really has been reflected, of course, in labor statistics and other statistics, and consumer confidence-numbers themselves," said Webster, as quoted by the source. "We're continuing to see that onward trend that we frankly saw begin last October, when we saw a drop in the price of gasoline year over year, which was really a catalyst to get discretionary spending going in the U.S."
Essentially, consumers have more money to spend because less cash is being used to fill up their gas tanks. The oil boom the United States recently encountered is improving the situation even further, as new extraction methods have made it easier for petroleum companies to fabricate goods cheaper.
Businesses more confident
Because consumer spending is so healthy, businesses are redirecting procurement to satisfy rising demand for commodities. In addition, enterprises are leveraging new capital to obtain assets necessary for maintaining operations. Bloomberg noted that orders for indirect, non-military goods rose 7.3 percent in January of this year.
Diane Swonk, chief economist for Chicago-based Mesirow Financial, told Bloomberg that companies are trying to satisfy backlogged demand in whatever way they can.
"The fundamentals that drive investment activity are improving rapidly," she informed the news source.
Greater confidence in the market means that organizations will have the capital necessary to obtain printed materials such as checks, customized contracts and other forms that are a regular part of contemporary business practices.