Consumers Starting to Feel Maybe Economy Isn’t So Bad After All

The last time people felt this good about money matters, stock values were hitting record highs and banks were offering 30-year mortgages with rates well under 4%.

KEY TAKEAWAYS

• The Consumer Confidence Index, the Conference Board's measure of how people feel about their own finances and the economy, rose in June to its highest level since January 2022.
• The unexpected jump in consumers' outlook added to signs of the economy remaining resilient against falling into a recession.
• A major source of confidence was the hot job market, with the number of people saying jobs were plentiful rising from May.
  
  

Consumers’ feelings about their own finances and the broader economy improved in June, although not enough to quell widespread fears of an impending recession, according to The Conference Board’s preliminary Consumer Confidence Survey released Tuesday.

The index of consumer confidence, a measure of how people feel about the present situation as well as the future, rose to its highest level since January 2022, before the Federal Reserve began slowing the economy with its campaign of anti-inflation interest rate hikes.1

The sunnier disposition of consumers in June reversed two straight months of declines and added to recent signs of the U.S. economy staying resilient under pressures dragging it towards a recession. Economists closely watch measures of consumer confidence because they can be something of a self-fulfilling prophecy: People are more likely to spend more if they are feeling secure, and consumer spending is the main engine of U.S. economic growth, accounting for 68% of the gross domestic product.

A major source of optimism in the survey was the job market: 46.8% of those surveyed said jobs were plentiful, up from 43.3% in May and consistent with recent government data showing job openings are indeed staying plentiful as many employers remain in hiring mode.

“It all comes down to jobs. Having a job. Having a steady income. That's key,” said Jennifer Lee, senior economist at BMO Capital Markets, in a commentary.2

The overall consumer confidence index jumped to 109.7 from 102.5 in May, much more than the increase to 104 that the median forecast of economists polled by Dow Jones Newswires and the Wall Street Journal had predicted.

Feelings improved in multiple areas of the survey, which polls about 3,000 households. Expectations for inflation rates a year from now fell for a third straight month and the share of people who said business conditions were good rose to 23.7% from 19.7%. 

People were also feeling optimistic about their own finances, with 30% saying their family finances would improve over the next six months, with only 14% expecting them to get worse.

Expectations for a recession fell too, with 69.3% saying one was “somewhat” or “very likely,” compared to 73.2% in May. An index measuring expectations for the future rose to 79.3 from 71.5, which is significant because historically, that measure has signaled a recession ahead when it falls below 80, according to Conference Board economists, and it has been under that level since December. 

ARTICLE SOURCES

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1. The Conference Board. "U.S. Consumer Confidence."
2. BMO Capital Markets. "Turning Up the Volume on U.S. Soft Landing Chatter."