Some good news popped up the other day in the form of The Conference Board’s Global Consumer Confidence Survey: consumer confidence jumped to 127.3 in June. That’s the highest it’s been since February 2020, and we all know what happened in March of that year.
A number over 100 is considered positive, and we were at 98 as of the end of 2020.
It’s easy to see why we’re here. The labor market continues to recover, more than 150 million people in the U.S. have been fully vaccinated against Covid and the economy is starting to open back up on many different fronts. Not only do people have jobs again, they have places to spend their money.
Housing prices are surging in the face of limited supply.
Vacations are booking up quickly.
Durable goods like cars and household appliances are selling like crazy.
From the experts: “Consumers have plenty to be cheerful about after being cooped up at home for more than a year. Looking ahead, low COVID infections, rebounding employment, and elevated savings will buoy confidence and push consumers to spend at a breakneck pace over the summer.” — Oren Klachkin, lead U.S. economist at Oxford Economics
More about consumer confidence
Beyond the headline consumer confidence figure, The Conference Board also surveys people on the temperature of current business and labor market conditions. That one increased to 157.7 from 148.7 last month, also a recent high.
Consumers’ short-term outlook for income, business and labor market conditions rose to 107.0 from 100.9 while inflation expectations over the next 12 months are up to 6.7% from 6.5% last month. (That last one is a worrying sign, but more on that later.)
The good news
Yes, the job market is bouncing back.
Nonfarm payrolls increased by 690,000 jobs in June after rising 559,000 in May and the unemployment rate is forecast to drop down to 5.7% this month (from 5.8% in June). Remember, unemployment jumped 10.3% from March to April 2020 to 14.7%, hitting the highest rate and the largest over-the-month increase since that data began being calculated in January 1948.
And we still have a ways to go to get back to full employment, meaning consumer sentiment should only continue getting better.
The bad news
But remember, I said we’d talk about inflation again.
Consumers are coming back to the marketplace and spending again. That’s great, but they’re also starting to notice that things are getting more and more expensive. Inflation is the natural byproduct of a recovering economy, so this isn’t a surprise, but there’s a limit to what people will spend. That’s how economics work — supply and demand.
When prices get too high, demand falls off. And that’s one of the primary risks to the economy right now, that runaway inflation will take hold and drag the country back into the doldrums before it can even get started.