The Conference Board's Consumer Confidence Index increased in July, up by 3.3 points from the revised 102.8 in June. The July index of 106.1 reached its highest level since June 2002. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence gained across both portions of the Conference Board index. The Expectations portion of the index, a measure of future economic activity, had the largest increase, up 5.0 points to 105.8 in July.
The Present Conditions index increased to 106.5 in July from 105.9 in June. This index measures how consumers perceive the current state of the economy.
The University of Michigan's Consumer Sentiment Index, a comparable index, also gained in July, rising to 96.7 from 95.6 in June. The component indices were mixed. The Expectations index was 2.7 points higher in July at 91.2, while the Present Conditions portion decreased slightly to 105.2 from 106.7 in June.
Consumer confidence has been strengthened by the gradually improving economy. Recent labor market gains have been a significant contributor to confidence increases. Other factors that support confidence are record household wealth as home prices continue to grow and relatively low interest rates which pervade despite recent increases.
However, several factors continue to weigh on consumer confidence. Energy prices remain relatively high and have increased over the month. Consumers carry high debt burdens and wage growth has been slow. In addition, retail prices are increasing and consumers lack pent-up demand for spending.
Consumer confidence is expected to gradually rise over time as the labor market continues to strengthen and overall recovery continues, though fluctuations are likely. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence is a closely watched economic indicator.
Sources: www.conference-board.com
www.economy.com
