U.S. consumer confidence jumped to its highest level in nearly 1-1/2 years in June as growing labor market optimism amid a reopening economy offset concerns about higher inflation. The survey from the Conference Board on Tuesday also showed a healthy appetite for long-lasting manufactured goods such as motor vehicles and household appliances, suggesting strong momentum in the economy as the second quarter ended.
Consumers were also keen to purchase homes, a sign that house prices will continue to rapidly increase as supply lags. Many intended to go on vacation, mostly in the United States, over the next six months, which should boost demand for services and add fuel to consumer spending.
The Conference Board’s consumer confidence index raced to a reading of 127.3 this month, the highest level since February 2020, from 120.0 in May. Economists polled by Reuters had forecast the index at 119.0. The survey places more emphasis on the labor market, which is steadily recovering. More than 150 million Americans have been fully vaccinated against the coronavirus, allowing for broader economic re-engagement.
The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, increased to 157.7 from 148.7 last month. The expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, rose to 107.0 from 100.9. Consumers’ inflation expectations over the next 12 months rose to 6.7% from 6.5% last month. Stocks on Wall Street rose, with the S&P 500 hitting a record high for the fourth straight session. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.
Economists are forecasting another double-digit rise in consumer spending this quarter, which is expected to lead to the economy growing at about a 10% annualized rate. Gross domestic product expanded at a 6.4% pace in the first quarter.