U.S. consumer confidence increased to a two-year high in July amid a persistently tight labor market and receding inflation, bolstering the economy’s prospects in the near term.
“We seem to be in an unusual eddy in this expansion, with consumer confidence up but consumer spending clearly leveled off,” said Robert Frick, corporate economist with Navy Federal Credit Union in Vienna, Virginia. “Lower inflation is why confidence has surged, but Americans have become cautious, trimming spending and increasing savings.”
Consumers’ perceptions of the likelihood of a recession over the next year rose, but stayed below the recent peak earlier in the year. About 70.6% of consumers this month said a recession was “somewhat” or “very likely,” up from 69.9% in June. Stocks on Wall Street were trading higher. The dollar was little changed against a basket of currencies. U.S. Treasury prices fell.“This likely reveals consumers’ belief that labor market conditions will remain favorable,” said Dana Peterson, the Conference Board’s chief economist.
The improvement in inflation expectations was, however, not enough to convince more consumers to make big-ticket purchases over the next six months. And while more households planned to buy houses, they could run into affordability challenges.
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