Consumer Confidence and Wage Growth

Consumer confidence

The US has two main surveys, the Conference Board's and the University of Michigan's, and the eurozone, UK and Australia have their own. They ask about current conditions, expectations, and willingness to make large purchases. Confidence tends to lead spending by a few months and is sensitive to petrol prices and headlines. The Michigan survey also publishes inflation expectations, which the Fed watches closely, and those have moved the dollar more than the confidence figure itself.

Wage growth

Wages are the largest cost for service businesses, so sustained wage growth above productivity growth pushes up services inflation, the stickiest kind. Central banks watch it to judge whether inflation is becoming self-sustaining. In the US, average hourly earnings arrive with payrolls and the employment cost index quarterly; the UK's average weekly earnings are released monthly and have driven Bank of England decisions; the ECB tracks negotiated wages.

The wage-price question

A wage-price spiral is a loop in which higher prices lead to higher wage demands, which lead to higher prices. Central banks raise rates partly to prevent it. When wage growth cools while inflation falls, the bank can ease with less fear; when wages stay strong, it holds. That logic is why a wage figure can move a currency more than the headline it accompanies.

Hierarchy

On any given day: central bank decisions and guidance first, then inflation and employment, then growth surveys and retail sales, then confidence. Wage data sits with employment when it arrives in the same report and with inflation when it arrives alone. The calendar lesson turns this hierarchy into a plan.

Key takeaways

• Confidence surveys lead spending; the Michigan inflation expectations figure is the one that moves markets.
• Wage growth feeds services inflation and central bank decisions.
• Cooling wages let banks ease; sticky wages keep them on hold.
• Both sit below inflation and jobs in daily impact.