July's Consumer Confidence Index reached a six-year high, but whether consumers stay upbeat remains to be seen.
Optimism over short-term economic prospects helped to send the Index to 112.6, the highest level since August 2001 when the reading was at 114. Last month's revised reading was 105.3.
"The rebound in consumer confidence has catapulted the Index to its highest reading in nearly six years....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.
Franco added, "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 rebound in confidence suggests economic activity may gather a little momentum in the coming months."
But will consumers still keep their purse strings open? The cutoff date for the Conference Board's survey of 5,000 U.S. households was July 24, shortly before the stock market sell-off last week, which could impact the psychology of consumer spending this month.
The Conference Board said the two components of the Consumer Confidence Index rose in July. The Present Situation Index increased to 139.2 from 129.9 in June, and is also near a six-year high from August 2001 when the reading was 144.5. The Expectations Index climbed to 94.8 from 88.8.
For the most part, consumers in July were more upbeat about current conditions than last month. Those claiming conditions are "good" increased to 28.1 percent from 27.3 percent, while those saying conditions are "bad" decreased to 14.4 percent from 16.1 percent. Consumers who said jobs are "hard to get" declined to 18.4 percent from 20.5 percent, while those claiming jobs are "plentiful" improved to 30.5 percent from 27.6 percent in June.
Boosting the Expectations Index was the slightly less pessimistic attitude of consumers regarding the outlook for the next six months, although the responses were mixed. Respondents who expect business conditions to worsen in the next six months declined to 8 percent from 10.8 percent, while those anticipating business conditions to improve dipped to 15.4 percent from 16.2 percent.
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