Consumer confidence continued its upward trend and approached to pre-pandemic level in May, as consumers became more upbeat about the current and future economic conditions and job market. Though short-term inflation expectations increased, it had little impact on consumer confidence or spending intentions. The share of consumers planning to buy homes, cars, and major appliances all increased, suggesting consumers will continue to support economic growth in the short-term.
The Consumer Confidence Index, reported by the Conference Board, rose 7.3 points from 120.0 to 127.3 in June, the highest level since the start of COVID-19 pandemic. The Present Situation Index climbed 9.0 points from 148.7 to 157.7, while the Expectation Situation Index increased 6.1 points from 100.9 to 107.0.
Consumers’ assessment of current business conditions significantly improved in June. The shares of respondents rating business conditions “good” increased by 4.6percentage points to 24.5%, while those claiming business conditions “bad” fell by 1.1 percentage points to 19.5%. Meanwhile, consumers’ assessment of the labor market was also more favorable. The share of respondents reporting that jobs were “plentiful” rose by 5.9 percentage points, while those saw jobs as “hard to get” declined by 0.7 percentage points.
Consumers were considerably more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve increased from 31.0% to 33.3%, while those expecting business conditions to deteriorate decreased from 14.4% to 10.6%. However, expectations of employment over the next six months were mixed. The share of respondents expecting “more jobs” fell by 2.0 percentage points to 25.7%, while those anticipating “fewer jobs” declined by 1.5 percentage points to 16.0%.
The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home rose to 6.1% in June. The share of respondents planning to buy a newly constructed home increased to 0.6%, and for those who planning to buy an existing home inched up to 2.4%. However, surging home prices and lack of inventory could further harm affordability and hinder ownership opportunity.