New York – Consumer confidence hit a six-year high in July, a widely watched gauge of sentiment showed Tuesday, as Americans shrugged off falling home prices to focus on a healthy jobs market.
The New York-based Conference Board said its Consumer Confidence Index rebounded to 112.6, its highest level since August 2001 when it was 114.0. That compared with a revised 105.3 in June. Analysts had expected a reading of 105. The July 24 cutoff for the preliminary survey of 5,000 U.S. households was before last week’s stock-market tumble, however.
“An improvement in business conditions and the job market has lifted consumers’ spirits in July,” said Lynn Franco, director of the Conference Board Consumer Research Center. “Looking ahead, consumers are more upbeat about short-term economic prospects, mainly the result of a decline in the number of pessimists, not an increase in the number of optimists. This … suggests economic activity may gather a little momentum in the coming months.”
The Present Situation index, how shoppers feel now about economic conditions, increased to 139.2 from 129.9 in June. That was the highest level since August 2001’s 144.5 reading.
The Expectations Index, shoppers’ outlook for the next six months, rose to 94.8 from 88.8.
Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.
The report on consumer confidence was encouraging and may help alleviate investor concerns about consumer spending amid a softening housing market that shows no sign of improvement. There have also been worries that high gasoline prices will continue to eat into consumers’ ability to spend for other things. While prices at the pump have declined, they are still higher than a year ago and are expected to tick up after the Labor Day weekend.
