U.S. consumers’ assessment of their outlook on the job market kept confidence levels constant in July.
American consumers are still relatively optimistic, and their assessment of current business and labor market conditions, as well as short-term outlook for business and labor over the next six months, is expected to keep spending at a steady pace. The Conference Board’s Consumer Confidence Index inched up to 129.1 in July, from 128.9 in June. The Present Situation Index, measuring current conditions, rose to 160.3 from 159.6. The Expectations Index, measuring the short-term outlook, dipped slightly to 108.4 from 108.5 last month.
In the July survey, 54.9 percent of consumers said of current conditions that jobs are “plentiful,” up from 54.7 percent. Looking ahead, 27.7 percent of respondents said they expect more jobs to be available in the months ahead, up from 26.6 percent last month.
“Consumers’ appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start,” Lynn Franco, senior director of economic indicators at The Conference Board, said. She noted that while short-term inflation expectations eased slightly, they remained elevated in July. However, respondents to the latest survey indicated plans to purchase homes, automobiles and major appliances in the coming months. This means that “consumer spending should continue to support robust economic growth in the second half of 2021,” Franco said.
Some experts have voiced concerns over consumers’ spending power now that unemployment benefits and rent moratorium extensions are about to end. Some believe that new child tax credits program will buoy back-to-school spending, although macroeconomics might move dollars away from clothing and shoes and onto experiential investments like travel, entertainment and dining out.
To be sure, spending on luxury goods is a different animal from middle-market and value-priced merchandise. But there was a glimmer of hope on Monday when LVMH‘s chief financial officer reported steady spending on the company’s luxury goods. If that trend holds true for middle-market and value spending, then National Retail Federation’s projection for 10.5 percent to 13.5 percent sales growth, or $4.44 trillion to $4.56 trillion, could come to fruition in 2021.
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The latest consumer confidence report indicates that business conditions, financial prospects and the job market are all looking up, Wells Fargo economist Tim Quinlan said Tuesday. The percentage of consumers who expect their income to improve over the next six months rose to 20.6 percent, representing the largest share since the pandemic struck, and some of that optimism stems from perceptions that labor market dynamics are improving, he said.
And while inflation is still top of mind for consumers, they may grumble about higher prices but not enough to put off spending, Quinlan added.