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Consumers grow more confident in future of economy

Assessment of current conditions remains at 16-year high

Consumers’ assessment of their current conditions remained at a 16-year high even as their confidence in the future edged higher, according to the Consumer Confidence Survey conducted by The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch.

The Consumer Confidence Index increased to 121.1 in July up from 117.3 in June. The Present Situation Index increased from 143.9 last month to 147.8 in July and the Expectations Index increased to 103.3, up from 99.6 last month.

In 1985, the index was set to 100, representing the index's benchmark. This value is adjusted monthly based on results of a household survey of consumers' opinions on current conditions and future economic expectations. Opinions on current conditions make up 40% of the index, while expectations of future conditions make up 60%.

“Consumer confidence increased in July following a marginal decline in June,” said Lynn Franco, The Conference Board director of economic indicators. “Consumers’ assessment of current conditions remained at a 16-year high, July 2001, 151.3, and their expectations for the short-term outlook improved somewhat after cooling last month.”

“Overall, consumers foresee the current economic expansion continuing well into the second half of this year,” Franco said.

Consumers’ assessment of their current conditions improved in July as those saying business conditions are good increased from 30.6% to 33.3%. Those who said business conditions are bad remained unchanged at 13.5%. Consumers also held a more favorable view of the labor market, as those saying jobs are plentiful increased from 32% to 34.1% while those saying jobs are hard to get decreased from 18.4% to 18%.

Americans also held a more optimistic short-term outlooks in July as the percentage of consumers expecting business conditions to improve over the next six months increased from 20.1% to 22.9%. Those who expect business conditions to worsen dropped from 10% to 8.2%.

The portion of consumers expecting more jobs in the months ahead remained unchanged at 19.2%, but those anticipating fewer jobs decreased from 14.6% to 13.3%. However, consumers were not as optimistic about their income prospects. The percentage of consumers expecting an improvement in their income dropped from 20.9% to 20%, while those expecting a decline increased from 9.3% to 10%.

Other reports also show a boost in confidence, not only in the economy, but also in the housing sector. More Americans than ever say now is a good time to sell their home, according to the Fannie Mae Home Purchase Sentiment index.

However, that optimism may not hold up as home prices continue to increase. A new report from Arch MI shows affordability will only continue to worsen into next year.

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