Consumer Confidence Is Solid

Consumer confidence is solid, at 97.3 in July and holding onto nearly all of June's 5 point jump. Jobs-hard-to-get, a subcomponent of the present situation index, is offering a positive indication for the July employment report, falling to 22.3 percent from 23.7 percent in June which was already a very strong month for the labor market. And readings on future employment, which is a subcomponent of the expectations index, also show improvement with slightly more seeing more jobs opening up and fewer seeing fewer jobs ahead.

The present situation index is up 1.7 points this month to 118.3 for the strongest indication on month-to-month consumer activity since September last year. This reading will give a lift to estimates for July consumer spending. The expectations index, however, is 1.3 points lower at 83.3 and reflects less optimism on business conditions, a downgrade that offsets the strength in future employment. Income expectations, another subcomponent of the expectations index, eased slightly as fewer see gains ahead.

A major negative in the report is a downtick in year-ahead inflation expectations to 4.7 percent which is very low for this reading. Policy makers are certain to note this as more evidence of inflationary resistance. Buying plans for autos are soft, down nearly 2 percentage points to 10.8 percent in a reading that will bring down estimates for July vehicle sales. Buying plans for homes and appliances are steady.

Steady along with strong are fair words to describe consumer confidence where strength ultimately reflects strength in employment.

Recent History Of This Indicator:
Reflecting only a limited impact from Brexit, the Conference Board's consumer confidence index is expected fall back to 96.0 in July following June's surprising jump to 98.0. Brexit did appear to have an effect on the consumer sentiment index, a separate report released earlier this month in which the July flash came in much lower than June with weakness centered in the expectations component, weakness that points to less confidence in the jobs outlook. Unlike sentiment, the confidence report offers details on buying plans and any weakness here would further hint at a Brexit impact, however temporary, on consumer spending.