by Index increases to its highest level in 2 years
WASHINGTON — The Conference Board reported this week that the Consumer Confidence Index rose in July to 117, up nearly seven points from 110.1 in June, and the highest level since July 2021.
Meanwhile, the Present Situation Index — which gauges consumers’ view of current business and labor market conditions — rose to 160 in July from 155.3 in June. The Expectations Index, which is based on consumers’ short-term outlook for income, business and labor market conditions, rose from 80 in June to 88.3 in July.
A level of 80 for the Expectations Index typically signals a recession in the next year. Although consumers are less convinced of a recession, the Conference Board said it still expects one to occur before the end of this year.
The report noted that consumers’ perceived likelihood of a recession in the next 12 months rose slightly in July with 70.6% saying a recession is somewhat or very likely, compared to 69.9% in June.
The increased level of consumer confidence was seen across all age groups and among both consumers earning annual incomes less than $50,000 and those making more than $100,000.
“Assessments of the present situation rose in July on brighter views of employment conditions, where the spread between consumers saying jobs are ‘plentiful’ versus ‘hard to get’ widened further,” said Dana Peterson, chief economist at the Conference Board. “This likely reflects upbeat feelings about a labor market that continues to outperform.”
Peterson added that when asked about current family financial conditions (a measure not included in calculating the Present Situation Index), the share of respondents citing a “good” situation rose, and those citing “bad” conditions fell, a sign that family finances remain healthy.
“This might reflect softening inflation and continued income support from employment,” Peterson said.
Relating to their present situation, other insights noted in the report were as follows:
+ 21.9% of consumers said business conditions were “good,” down from 23.4% last month.
+ 15.2% said business conditions were “bad,” down slightly from 15.3%.
+ 46.9% of consumers said jobs were “plentiful,” up from 45.4%.
+ 9.7% of consumers said jobs were “hard to get,” down from 12.6% last month.
Peterson noted that expectations for the next six months improved, which reflects greater confidence about future business conditions and job availability.
“This likely reveals consumers’ belief that labor market conditions will remain favorable,” Peterson noted, adding that expectations for future incomes ticked down slightly, which reflects the possibility of slower wage growth compared to a year ago. The measure of expected families’ financial situations, six months from now, also softened in July.
Meanwhile, the survey noted, consumers were more optimistic about the short-term business conditions outlook in July. For example:
+ 17.1% of consumers expect business conditions to improve, up from 14.6% in June.
+ 14.0% expect business conditions to worsen, down from 17.7% in June.
However, consumers’ assessment about the short-term labor market outlook was more favorable. For example:
+ 16.4% of consumers expect more jobs to be available, up from 15.4%.
+ 14.8% anticipate fewer jobs, down from 16.7%.
Consumers’ short-term income prospects in July were as follows:
+ 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.
Consumers’ assessment of their family’s current financial situation also signaled healthy family finances in July.
+ 31.6% of consumers say their current family financial situation is “good,” up from 28.8% in June.
+ 17.6% say their current family finances are “bad,” down from 18.6%.
Peterson added that consumers continued to report that they plan 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.”
Some 23% of those surveyed said they plan to spend more over the next six months on areas such as household maintenance, which could include spending on new home furnishings, compared to 57.7% who said they plan to spend about the same and 18.9% who said they plan to spend less.
