Consumer confidence climbs to 2-year high as worry over inflation and recession ease

Consumer confidence tends to signal whether the economy is getting better or worse. The index has rebounded from a weak spell early in the year, though it still lags well below pre-pandemic levels.

Economists polled by The Wall Street Journal had forecast the index to register 112.

Key details: A measure that looks at how consumers feel about the economy right now rose to 160.0 in July from 155.3 in the prior month. That’s the highest level since the onset of the pandemic in March 2020.

“Greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000,” said Dana Peterson, chief economist at the board.

A confidence gauge that looks ahead six months advanced to 88.3 from 80 in June.

The future-expectations index is now well above the 80 mark that often signals a recession ahead. The index has been below that level in every month except for two in the 16 months preceding the July report.

Big picture: Americans aren’t exactly thrilled about the economy. They are paying more for everything because of high inflation. And now rising interest rates have made it more costly to borrow money to buy a house, a car or other big-ticket items.

Yet the U.S. jobs market is as good as it’s been in years, with Americans saying jobs are easy to find. Unemployment is near the lowest level since the 1960s and wages have risen more rapidly to help offset some of the inflation pain.

As a result, households are spending enough money to stave off a widely predicted recession — even though 70.6% of consumers surveyed think a downturn is “somewhat” or “very likely” in the next 12 months.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.06%
and the S&P 500
SPX,
+0.14%
were little changed in Tuesday trades.