Consumer confidence hits a pandemic-era high

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Wednesday, July 28, 2021

Inflation doesn't scare off consumers in July

The last time consumers felt this good, the spread of COVID-19 hadn't yet been declared a global pandemic. 

On Tuesday, The Conference Board reported consumer confidence in July rose to 129.1, the highest level since February 2020.

"Consumers' appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start," said Lynn Franco, senior director of economic indicators at The Conference Board. 

"Consumers' optimism about the short-term outlook didn't waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve," Franco added.

Even with inflation on the rise and the Delta variant spreading rapidly, it seems that U.S. consumer spending, which powers the economy, remains as it has for so much of this pandemic — resilient

Of particular note in Tuesday's report were Franco's comments about how consumers see conditions for making big ticket purchases, notably homes, appliances, and cars. 

"Spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles, and major appliances in the coming months," Franco said. 

Housing data out earlier this week indicated the fever in the U.S. housing market might be breaking, with prices and the pace of sales slowing after a frenzied, supply-choked spring for new buyers. And with some data suggesting used car prices have peaked (although other data suggests appreciation continues) consumers are perhaps being met with less sticker shock at open houses, and on dealer lots. 

Wage gains and confidence in the labor market also appear to be supporting demand for big ticket items, as a net 14% of consumers expect their incomes will rise over the next six months. Additionally, the spread between those indicating jobs are plentiful and those who see jobs as hard to get rose to 44.4%, the highest since June 2000, according to Oxford Economics. 

The report also indicated that inflation expectations fell slightly this month, with consumers now expecting prices to rise 6.6% in the next year after a 6.7% increase in June. 

Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted Tuesday that this forecast is only 0.6% higher than in December 2020, suggesting consumers don't see the surge in goods and services impacted by the re-opening to stick around. 

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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