U.S. Consumer Confidence Improves in July; Inflation Expectations Unchanged

The Conference Board's Index of Consumer Confidence in July rose 2.6% (-12.0% y/y) to 100.3 after falling 3.5% in June to 97.8, revised from 100.4. Confidence improved 3.9% in May to an unrevised index level of 101.3. A July reading of 99.6 had been expected in the Action Economics Forecast Survey. The latest level remains below the high of 137.9 in October 2018 and below the latest high of 114.0 in July of last year.

The component readings remained mixed this month. The Present Situations Index fell 1.3% (-12.7% y/y) to 133.6 after falling to 135.3 in June, revised from 141.5, following little change in May at 140.8. Offsetting this decline, the Expectations Index surged 7.4% (-11.1 y/y) to 78.2 after declining 2.8% in June to 72.8, revised from 73.0, after rising an unrevised 8.9% in May.

A steady 18.8% of respondents characterized current business conditions as good in July, remaining below its high of 23.4% in June 2023. Labor market readings weakened this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, fell to 18.1% this month from 19.8% in June. The reading remained below the high of 31.7% six months ago. Calculated by Haver Analytics, this series has a 61% correlation with the unemployment rate over the last ten years. The jobs plentiful measure declined to 34.1% from 35.5% and remained below the March 2022 high of 56.7%. The jobs hard-to-get reading of 16.0% compared to 15.7% in June and 14.3% in May. The jobs not-so-plentiful reading increased to 49.9% from 48.8% in June and has been trending higher since its 30.5% low in September 2021.

In July, a higher 14.8% of consumers believed that business conditions in six months would improve, compared to 13.2% in June. A lessened 16.7% believed they would worsen versus 19.1% three months ago. A higher 14.5% of respondents felt there would be more jobs in six months, up from 12.3% three months ago but below 17.6% at the end of last year. A greatly lessened 15.6% expected income to increase in six months, down from 18.3% in December and below a high of 19.6% in October of 2022.

Inflation expectations remain steady and reduced from their high. The expected inflation rate in twelve months of 5.4% during July compared to 5.4% in May and June. It was increased from 5.2% in February, remaining below the 7.9% high in June 2022. The reading was above the 4.4% low in January 2020.

A lessened 50.3% of respondents felt that interest rates would be higher in twelve months, compared to 55.5% in May. A greatly increased 24.4% thought they would be lower. A higher 49.1% of respondents believed that stock prices would be higher in twelve months, and that was increased from a low of 25.5% in July 2022. A slightly lessened 23.5% thought stock prices would be lower in twelve months versus a high of 44.7% in July of 2022. The share of respondents planning to buy a home within six months plunged to 4.2% from 5.1% in June and remained below the October 2022 high of 7.4%. The percentage of respondents planning to buy a major appliance fell to 45.5% from 46.5% in June, after surging to 48.9% in May.

The Consumer Confidence data are available in Haver's CBDB database. The total indexes, which are indexed to 1985=100, appear in USECON, and market expectations are in AS1REPNA.