Americans haven't felt this good about the economy in 2 years
- The Conference Board's consumer confidence gauge just hit its highest level in two years.
- It rose to 117 in July, up from 110.1 in June, Tuesday data showed.
Americans are feeling pretty upbeat about the state of the economy.
The Conference Board's consumer confidence index, published on Tuesday, hit the highest mark since July 2021. The closely watched gauge climbed to 117 in July, up from 110.1 in June and beating the median Bloomberg estimate of 112.
"Headline confidence appears to have broken out of the sideways trend that prevailed for much of the last year," Dana Peterson, Chief Economist at The Conference Board, said in a statement. "Greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000."
Americans have rosier views of the labor market, the data showed, and more people reported feeling "good" about family finances while fewer reported feeling "bad." Wages are once more back to keeping pace with inflation, and that trend could continue in the coming months as prices keep cooling.
In a note on Tuesday, Barclays analysts pointed out that increases in the reading in the past few months have pushed the gauge back toward pre-pandemic levels, and that the University of Michigan consumer sentiment gauge also gained in June.
"[B]oth indicators are on an upswing as consumers take positive signals from the resilient labor market and receding inflation in recent months," the Barclays analysts wrote.
The improving economic outlook reflects easing inflation and the ongoing resilience of the labor market, Peterson said.
"Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability," Peterson maintained. "This likely reveals consumers' belief that labor market conditions will remain favorable."
To be sure, the share of consumers who said recession is "somewhat" or "very likely" increased in July, but expectations of a downturn remain below their recent peak, which does suggest fears are waning.
What's more, fewer respondents said they expect to buy major household appliances like refrigerators and washing machines. But at the same time, a growing proportion do plan to buy homes and vehicles, according to the Conference Board.
Meanwhile, the Federal Reserve is slated to announce its policy decision Wednesday, and the consensus expectation points to a quarter-point rate hike. That would mark the 11th move higher for the Fed's benchmark rate in a year and a half, and would resume rate hikes after last month's "skip."
In June, inflation slowed annually to 3.0%, down from 9.1% during the same month in 2023.