US Consumer Confidence Reaches 2-Year High as Inflation Eases: 8 Charts Tracking the Resilient Economy
US consumer confidence soared to its highest level in two years in July, as inflationary pressures eased and the economy continued to show resilience despite higher interest rates. The Conference Board reported that its consumer confidence index rose to 117, surpassing economists’ expectations and marking the highest level since July 2021.
The index measures both Americans’ assessment of current economic conditions and their expectations for the future. Both indicators improved in July, with the future expectations index surpassing the recession threshold recorded in June. This increase in consumer confidence is significant, as consumer spending accounts for around 70% of US economic activity.
The decline in consumer confidence throughout the past year was mainly due to surging prices, which impacted household budgets. However, as inflation eased and the Federal Reserve implemented 10 interest rate hikes, confidence gradually began to return. The US economy has proven to be surprisingly resilient in the face of higher borrowing costs, with employers adding 278,000 jobs per month this year. Additionally, the unemployment rate in June remained close to a half-century low at 3.6%.
The combination of tumbling inflation and robust hiring has raised hopes that the Federal Reserve can achieve a soft landing by slowing the economy just enough to tame inflation without triggering a recession. Dana Peterson, the chief economist at the Conference Board, highlighted the improvement in consumers’ expectations for future business conditions and job availability as a positive sign. This reflects consumers’ confidence in the labor market remaining favorable.
————————————————————–
These are uncertain times for the US economy, with factors such as inflation, interest rates, and job market conditions playing crucial roles in shaping consumer sentiment. The latest data from the Conference Board suggests that consumers are feeling optimistic about the future. Let’s take a closer look at the key points.
Consumer confidence in the US reached its highest level in two years, according to the Conference Board. The index rose to 117 in July, surpassing economists’ expectations and marking the highest level since July 2021. This increase was driven by improvements in both current economic conditions and future expectations.
Economists closely monitor consumer confidence because consumer spending has a significant impact on the US economy, accounting for approximately 70% of economic activity. The decline in consumer confidence over the past year was primarily attributed to surging prices, which eroded household budgets. However, as inflation eased and the Federal Reserve implemented interest rate hikes, confidence began to rebound.
Despite higher borrowing costs, the US economy has shown surprising resilience. Employers have been adding an impressive 278,000 jobs per month so far this year. Additionally, the unemployment rate remained near a half-century low of 3.6% in June.
The combination of declining inflation and robust hiring has raised hopes for a soft landing – a scenario in which the economy slows down just enough to control inflation without plunging into a recession. Consumers’ improved expectations for future business conditions and job availability suggest that they believe the labor market will remain favorable.
The outlook for the US economy remains uncertain, as various factors can influence consumer confidence. However, the recent surge in confidence reflects a positive shift in sentiment, indicating that consumers are feeling more optimistic about the future. It remains to be seen how economic conditions will evolve and whether this increase in confidence will be sustained.
The charts tracking the US economy provide valuable insights into the current state and future trajectory of the economy. By analyzing these charts, economists can better understand the trends and dynamics that shape consumer behavior and drive economic growth. As policymakers navigate the challenges ahead, monitoring these key indicators will be crucial for making informed decisions to support the economy.
