Why Consumer Confidence Is on the Rebound After Three Months of Declines

American consumers are feeling more optimistic than they have been in several months on the heels of a stock market rally, solid jobs numbers and the end of the 35-day government shutdown.

According to the monthly report compiled by not-for-profit research group The Conference Board, U.S. consumer confidence this month rose to 131.4, up from 121.7 in January. Last month’s results demonstrated the impact of political uncertainty at home and abroad as 380,000 federal workers were furloughed and an additional 420,000 were required to continue work without pay for more than a month while President Donald Trump appeared to make little progress in his trade talks with China. (On Sunday, the president said on Twitter that he would extend the March 1 deadline for tariff increases as the administration continued “productive talks” with Chinese officials.)

The improved conditions in February affected both consumers’ assessment of current business and labor market conditions — as measured by The Conference Board’s Present Situation Index — and their short-term outlook for income, business and labor market conditions — as measured by the Expectations Index. The former rose from 170.2 last month to 173.5 this month, while the latter bounced back from 89.4 to 103.4.

“Expectations, which had been negatively impacted in recent months by financial market volatility and the government shutdown, recovered in February,” said Lynn Franco, senior director of economic indicators at The Conference Board. “Looking ahead, consumers expect the economy to continue expanding.”

This is good news for retailers, which have been wary not only of the trade war’s long-term effects but also a possible economic slowdown in the U.S., which could take a toll on the sector’s recent gains.

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