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July 31, 2018 Blog 1 min read
Despite headlines dominated by political turmoil and the threat of rising trade tensions, consumers are still focused on the strength of the labor market and economy and they like what they see.

73118 Consumer Confidence Chart

The Conference Board’s measure of consumer confidence edged higher in July to 127.4, besting expectations for 126.0 and also rising from 127.1 in June.

The overall mood of the consumer remains very positive, particularly their assessment of the current state of the economy. Political turmoil in Washington may dominate headlines, but consumers appear content to shrug that off as long as the economy remains on track.

To this point, the impact of tariffs and rising trade tensions hasn’t been sufficient to really get the attention of consumers. Still, the risk is real and growing.

It’s possible that may help to explain the growing divergence in consumers’ assessments of current conditions and future expectations. Even as the index suggests an exceedingly rosy view of the economy today, enthusiasm for the future has dimmed. Still, it’s all relative, and it would be hard to characterize even that future outlook as negative.

Recent inflation data showed that energy prices were a notable driver to price increases over the past year – a reality that hasn’t been lost on consumers who have been hit by surging gas prices. A brief spike in prices tends to have a limited effect on consumer spending or sentiment; a sustained price increase likely will though.

Broadly, the story remains a good one. Growth picked up in recent months, driven by a surge in consumer spending, fueled by labor market strength and better take-home pay in the aftermath of tax cuts. Whether or not that acceleration in activity can be sustained remains to be seen. Nonetheless, for now, household spending remains solid, and the overall mood of the consumer sector remains quite positive.

 

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