The Conference Board Consumer Confidence Index rose again in July to 117.0 (1985=100), up from 110.1 in June. The Present Situation Index based on consumers’ assessment of current business and labor market conditions—improved to 160.0 (1985=100) from 155.3 last month. The Expectations Index based on consumers’ short-term outlook for income, business, and labor market conditions improved to 88.3 (1985=100) from 80.0 in June. Importantly, Expectations climbed well above 80—the level that historically signals a recession within the next year. Despite rising interest rates, consumers are more upbeat, likely reflecting lower inflation and a tight labor market. Although consumers are less convinced of a recession ahead, we still anticipate one likely before yearend. “Consumer confidence rose in July 2023 to its highest level since July 2021, reflecting pops in both current conditions and expectations,” said Dana Peterson, Chief Economist at The Conference Board. “Headline confidence appears to have broken out of the sideways trend that prevailed for much of the last year. 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.” Peterson added: “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. This likely reflects upbeat feelings about a labor market that continues to outperform. 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, signaling still-healthy family finances. This might reflect softening inflation and continued income support from employment. “Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability. This likely reveals consumers’ belief that labor market conditions will remain favorable. Expectations for future incomes ticked down slightly, a potential reflection of slower wage growth compared to a year ago. The measure of expected family financial situation, six months hence (not included in the Expectations Index) also softened somewhat in July—despite further decline in the 12-month forward inflation expectations gauge. “The proportion of consumers saying recession is “somewhat” or “very likely” to occur ticked up in July, contrary to the Expectations Index spiking this month above the threshold of 80. Still, recession expectations remained below their recent peak, suggesting fears of a recession have eased relative to earlier this year. “In our periodic survey of services, consumers continued to report intentions 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.” 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.
Conference Board – Consumer Confidence Index (07-25-23)
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