U.S. consumer confidence soared to its highest level since July 2021, according to data issued Tuesday by The Conference Board, driven by a strong job market and a steady decrease in inflation.
The Consumer Confidence Index rose to 117 in July, a significant jump from 110.1 in June.
The spike in consumer confidence was observed across all age groups, in both lower and higher income brackets, according to Dana Peterson, chief economist at The Conference Board.
The Federal Reserve is expected to raise the interest rate in the coming days as consumers are experiencing financial hardship.
The broad-based confidence boost reflects improving perceptions of business and labor market conditions, alongside optimistic short-term expectations for income, business and labor conditions, she said.
The Present Situation Index, which assesses consumers’ views of business and labor market conditions, also saw a favorable improvement, rising from 155.3 the previous month to 160. Interestingly, the Conference Board noted a widening gap between the number of consumers who believe jobs are “plentiful” versus those who see jobs as “hard to get,” pointing to a labor market that continues to perform well.
On the flip side, while consumer confidence in the labor market remains strong, there is a slight decrease in expectations for future income growth. And, consumers’ belief in the likelihood of a recession within the next 12 months increased slightly from 69.9% in June to 70.6%, suggesting some residual economic anxiety.
As part of the survey, consumers reported intentions to cut back on discretionary services like travel, recreation and gambling in the coming months. In contrast, expectations increased for necessary spending on services like health care, as well as affordable services like home streaming.
The Conference Board’s report supports recent data suggesting the U.S. could avert a recession, with the job market holding firm and key inflation gauges indicating progress.
“The simplest explanation is inertia,” said certified financial planner Kevin Brady, vice president at Wealthspire Advisors in New York. “People are busy with their day-to-day lives, and the attention needed to research alternatives and execute the change falls down the priority list.”
Broad consumer confidence bodes well for many ETFs that track the U.S. economy’s performance. For example, sector-specific ETFs like the Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY) and the Health Care Select Sector SPDR Fund (NYSE:XLV), could benefit from consumers’ indicated spending intentions.
“For many of them, the juice just isn’t worth the squeeze,” said Dallas-based CFP Brandon Gibson, wealth manager at Gibson Wealth Management.
Both the Trump and Biden administrations passed the coronavirus packages in three different bills. The Trump administration passed $3 trillion and $900 billion packages that included the paycheck protection program, stimulus checks, and pandemic unemployment assistance. The Bident Administration had only passed a $1.9 trillion coronavirus package.
Produced in association with Benzinga