Consumer confidence reaches two-year high

Consumers are feeling more upbeat amid cooling inflation and a still-tight labor market.

That’s according to The Conference Board, whose Consumer Confidence Index jumped to 117 for July, its highest level since July 2021 and up from 110.1 in June. 

 The Present Situation Index increased to 160 in July from 155.3 in June, while the Expectations Index rose to 88.3 from 80 last month. The Conference Board noted that, at 88.3, the Expectations Index is well above 80 — the level that historically signals a recession within the next year. 

“Headline confidence appears to have broken out of the sideways trend that prevailed for much of the last year,” said Dana Peterson, chief economist at The Conference Board. “Greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000.”

Consumers are still worried about a recession. The proportion of consumers who think a downturn is “somewhat” or “very likely”  inched up up to 70.6% from 69.9 up from 69.9%. Still, recession expectations remained below their recent peak, suggesting fears of a recession have eased relative to earlier this year.

The Conference Board’s periodic survey of services showed that consumers plan to continue to spend less on discretionary services — including travel, recreation  and gambling — going forward. 

“By contrast, they anticipate spending more in the months ahead on necessary services like health care, as well as cheaper services like streaming from home,” Peterson said.

Findings from the July report are below.

Present Situation

Consumers’ assessment of current business conditions was slightly less optimistic in July.

• 21.9% of consumers said business conditions were “good,” down from 23.4% last month.
• 15.2% said business conditions were “bad,” essentially unchanged from 15.3%.

However, consumers’ appraisal of the labor market improved.

• 46.9% of consumers said jobs were “plentiful,” up from 45.4%.
• 9.7% of consumers said jobs were “hard to get,” much lower than 12.6% last month.

Expectations Six Months Hence

Consumers were more optimistic about the short-term business conditions outlook in July.

• 17.1% of consumers expect business conditions to improve, up from 14.6%.
• Meanwhile, 14.0% expect business conditions to worsen, down from 17.7% in June.

Consumers’ assessment about the short-term labor market outlook was more favorable.

• 16.4% of consumers expect more jobs to be available, up from 15.4%.
• Moreover, 14.8% anticipate fewer jobs, down from 16.7%.

Consumers’ short-term income prospects became more tempered in July.

• While 16.3% of consumers expect their incomes to increase, down from 18.6% last month,
• Only 9.7% expect their incomes will decrease, down from 11.8% in June.