Consumer confidence reaches two-year high
The Consumer Confidence Index (CCI) has long been viewed as a key measure of consumer optimism. It’s released each month by The Conference Board, a U.S.-based provider of economic data and analytics. The index has a benchmark of 100. Any level above 100 indicates an optimism by consumers on jobs, income and the economy. Below 100 conveys pessimism.
During the height of the COVID pandemic in April 2020, the index fell from 118.8 to just 85.7 in a single month. The all-time low for the CCI index is 25 set in February 2009 during the global financial crisis. The all-time high was reported at 144.7 in May 2000.
For the month of July, the CCI was reported at 117, beating Wall Street’s forecast of 111.8. It marks the highest level for the index since July 2021 and the twelfth consecutive month above 100. June’s CCI was reported at 110.1. Dana Peterson, Chief Economist at The Conference Board, noted “Greater confidence was evident across all age groups, and among both consumers earning income less than $50,000 and those making more than $100,000.”
But there continues to be a divergence in consumer optimism between short-term and longer-term expectations. In the short-term, consumer optimism remains fairly strong. But in the longer-term, that optimism starts to fade. In July, consumer expectations on the likelihood of a recession actually increased. 70.6% of consumers now say the economy is “somewhat likely” or “very likely” to dip into recession within the next 12 months. This is up from the 69.9% reported in June.
Despite growing consumer apprehensions of an economic recession, Peterson suggests a still-resilient labor market is behind the rise in short-term optimism. The national unemployment rate stands at 3.5%, a 50-year low. So far this year, the U.S. economy is averaging 258,000 new jobs per month. There’s also around 9.6 million unfilled job openings across the nation. All this data conveys that, overall, employers still have a strong demand for qualified workers.
The labor market is playing a crucial role in maintaining an elevated level of optimism among consumers. In July, according to The Conference Board, 46.9% of consumers surveyed said jobs were “plentiful”, up from the 45.4% reported in June. Likewise, just 9.7% said jobs were “hard to get”, down from 12.6% in June.
Optimistic and confident consumers tend to spend their money more freely, which ultimately drives economic growth. In the end, continued strength in the labor market is what may be needed to keep consumers optimistic and to potentially keep the economy from going into recession.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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