US consumer confidence rose in June to the highest level in almost two years amid renewed optimism in the labor market, while business spending appeared to hold up in May, indicating that the economy remains on a solid footing despite fears of a recession.
Hopes that the economy could avoid deflation in the near term were also boosted by other reports on Tuesday indicating that a housing market recovery was likely underway, with new home sales rising to a 15-month high in May and monthly home prices rising again in April.
However, optimistic data suggests that the Fed will most likely have to continue raising interest rates to slow down demand in the macroeconomy.
The US central bank, which has raised the interest rate by 500 basis points since March 2022, indicated this month that two more rate hikes are justified this year.
However, consumers continued to expect a recession at some point over the next six to 12 months.
But they are becoming more optimistic about the job market, with the share seeing ‘plentiful’ jobs rising and the proportion of those saying jobs are ‘hard to come by’falling.
The survey’s so-called labor market gap, derived from data on respondents opinions on whether jobs are plentiful or hard to come by, rose to 34.4 from 30.7 in May, a sign that labor market conditions remain tight despite first-time applications for state unemployment benefits hovering at their highest levels in more than a year and a half. This metric correlates with the unemployment rate in the employment report, which is closely followed by the Ministry of Labor.
Although the income forecast fell slightly, consumers were generally optimistic about family finances.
Consumer inflation expectations for the 12-month period fell to 6.0%, the lowest reading since December 2020, from 6.1% last month. The improvement in confidence reflects the sentiment survey conducted by the University of Michigan.
