U.S. Consumer Confidence Leveled Off in July -- The Conference Board

Consumer confidence in the U.S. was broadly stable in July following five months of gains amid the spread of the Covid-19 Delta variant and rising inflation.

The consumer confidence index increased slightly to 129.1 in July from an upwardly revised 128.9 in June, data from The Conference Board showed Tuesday. The reading beat economists consensus, who polled by The Wall Street Journal expected the indicator to decrease to 124.0.

July's largely unchanged confidence reading comes after five consecutive months of gains driven by the reopening of the economy and fiscal stimulus. In February 2020, before the pandemic hit the U.S., confidence stood at 132.60.

Consumer confidence hints Americans' willingness to spend on goods and services, which is a major driver of the U.S. economy. Confidence should continue to advance in the next few months, but the spread of the Covid-19 Delta variant, the early end of some unemployment benefits programs in some states or higher inflation could weigh on consumers' mood in the short-term.

However, high-frequency data don't point to a pullback in consumer spending for now, economists say.

"Consumer spending should continue to support robust economic growth in the second half of 2021," said Lynn Franco, senior director of economic indicators at The Conference Board.

Spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles and major appliances in the coming months, she said.

Short-term inflation expectations eased slightly but remained elevated. Recent inflation dynamics are likely to hit consumer confidence to a greater degree than the spread of the Delta variant because it affects everybody regardless of their vaccination or political identification, Tim Quinlan, senior economist at Wells Fargo, said.

"Inflation could be an impediment to an otherwise rosy outlook for consumer confidence and spending," he said.

The present situation index, which reflects consumers assessment of current business and labor market conditions, rose to 160.3 in July from 159.6 in June, signaling that economic growth in the third quarter is off to a strong start.

The expectations index, which gauges short-term outlook for income, business and labor market conditions, dropped marginally to 108.4 from 108.5 the previous month.

Consumers' optimism about the short-term outlook didn't waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve, Ms. Franco said.

Another consumer sentiment survey carried out by the University of Michigan showed that Americans sentiment deteriorated in early July compared with June amid concerns over high inflation.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

  (END) Dow Jones Newswires
  07-27-21 1033ET
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