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U.S. consumer confidence at 17-month high, business spending on equipment strong
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Customers are seen shopping at a Costco store in Novato, California, U.S., July 13, 2021. /CFP

Customers are seen shopping at a Costco store in Novato, California, U.S., July 13, 2021. /CFP

U.S. consumer confidence inched up to a 17-month high in July, with households' spending plans rising even as concerns about higher inflation lingered, suggesting the economy maintained its strong growth clip early in the third quarter.

The economy's prospects were further brightened by other data on Tuesday showing a solid increase in new orders for manufactured capital goods in June despite supply constraints hampering production at some factories, indicating that business spending on equipment could remain strong for a while.

The reports could ease worries about a sharp slowdown in growth in the second half of the year as the boost from massive fiscal stimulus fades. The economy is believed to have notched its second-fastest growth pace since 1983 in the second quarter.

The Conference Board said its consumer confidence index ticked up to a reading of 129.1 this month, the highest level since February 2020, from 128.9 in June. Economists polled by Reuters had forecast the index would fall to 123.9.

Consumers' inflation expectations over the next 12 months dipped to 6.6 percent from 6.7 percent last month. The Conference Board survey places more emphasis on the labor market. The University of Michigan's survey of consumers showed sentiment falling in early July because of inflation concerns.

Consumer confidence held up despite the Delta variant of the coronavirus driving a surge in new infections, mostly among the unvaccinated. Confidence fell in the West South Central and West North Central states, as well as the Mountain region, which have low vaccination rates and are experiencing a surge in infections.

"The Delta variant does pose some downside risk, although we do not expect it to derail confidence entirely, given that its spread is uneven and largely concentrated in areas with low vaccination rates," said Pooja Sriram, an economist at Barclays in New York.

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, nudged up to 44.4 in July. That was the highest level since 2000 and up from 44.2 in June. This measure closely correlates to the unemployment rate in the Labor Department's closely watched employment report.

More households intended to buy long-lasting manufactured goods, such as motor vehicles and household appliances such as refrigerators and television sets, which should help to underpin consumer spending and manufacturing, the survey showed. Consumers were also keen to purchase homes.

Households are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic.

Stocks on Wall Street were trading lower ahead of earnings reports from major companies and as the Federal Reserve held a two-day policy meeting. The dollar slipped against a basket of currencies. U.S. Treasury prices were higher.

Source(s): Reuters

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