The Conference Board's Consumer Confidence Index increased in October to 108.7, up from a revised 99.2 in September, and exceeding the 99.1 consensus expectation in the Econoday survey of forecasters.

Consumers' assessment of current business and labor market conditions-increased, as did their short-term outlook for income, business, and labor market conditions.

"Consumer confidence recorded the strongest monthly gain since March 2021," the Conference Board said, noting that all five components of the Index improved. Consumers' views of current business conditions turned positive and their assessment of the current availability of jobs rebounded after several months of weakness,"potentially reflecting better labor market data."

"Compared to last month, consumers were substantially more optimistic about future business conditions and remained positive about future income," the report said."Also, for the first time since July 2023, they showed some cautious optimism about future job availability."

The Conference Board said the share of consumers anticipating a recession over the next 12 months fell to its lowest level since the question was initially asked in July 2022, as did the percentage of those that believed the economy is already in recession.

However, average one-year inflation expectations rose to 5.3 percent in October from 5.2 percent in September."This may reflect continued upward pressures on food and services prices," the report said, while noting that inflation expectations are still well below the peak of 7.9% in March 2022.

On a six-month moving average basis, consumers' plans to buy homes and new cars continued to increase. As for plans to buy more durable goods or services over the next six months,"consumers continued to express a slightly greater preference for purchasing goods," it said.

The consumer confidence index dropped to 98.7 in September from 105.6 in August as the mood darkened. Forecasters look for a recovery to 99.1 in October but sentiment is expected to remain depressed from summer levels.

The Conference Board's confidence report surveys consumers on their assessments of the labor market, business activity, and their own financial conditions. The survey is conducted by Toluna, an online community platform. (Conference Board and Toluna)

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer confidence index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.