US consumer confidence rose to an 18-year high in October, driven largely by a robust labour market, bolstering expectations that strong economic growth would continue through early 2019.
But a weakening housing market and tightening financial market conditions are casting a shadow on the economic expansion that is in its ninth year, the second longest on record. Home price gains slowed further in August, other data showed, another sign that higher mortgage rates were weighing on housing demand.
"We don't know how long this is going to hold up, but the consumer is bullish on the outlook and this means the economy is going to continue to advance in this long economic expansion from the last recession," said Chris Rupkey, chief economist at MUFG in New York.
The Conference Board said its consumer confidence index reading rose to 137.9 this month, the highest since September 2000, from a downwardly revised 135.3 in September. Economists polled by Reuters had forecast the consumer index slipping to 136.0 from the previously reported 138.4 in September.
Consumers' assessment of current business and labour market conditions improved despite a sharp stock market sell-off and jump in US Treasury yields, which have tightened financial market conditions. The stock market's S&P 500 index has dropped more than 8 percent this month.
The Conference Board survey puts more emphasis on the labour market. The survey's so-called labour market differential, derived from data about respondents saying jobs are scarce or plentiful, was the most favourable since January 2001.
This measure closely correlates to the unemployment rate in the Labour Department's employment report. Economists said it raised the possibility that the unemployment rate could drop further from a near 49-year low of 3.7 percent. The government will publish its October employment report on Friday.
Consumer confidence at multi-year highs bodes well for spending in the upcoming holiday season. More consumers planned to buy automobiles and houses over the next six months, but the share of those intending to purchase major appliances slipped.
The economy grew at a 3.5 percent annualized rate in the third quarter and is considered on course to achieve the Trump administration's target of 3.0 percent annual growth this year.
Growth has been spurred by a $1.5 trillion tax cut. Economists estimate the tax cut stimulus peaked in the third quarter and expect growth to gradually slow from the second half 2019, restrained in part by higher interest rates.
A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite home price index of 20 US metropolitan areas rose 5.5 percent in August from a year ago after increasing 5.9 percent in July. Growth in house prices has slowed from as high as 6.8 percent in March. Prices had been boosted by a shortage of properties on the market, but now mortgage rates have risen to seven-year highs.