Americans’ confidence in the U.S. economy climbed for the fourth straight month in June, hitting a 28-year high, but failed to stir inflation fears Tuesday amid signs that shoppers are restraining their spending.
The Conference Board, a private business group, said its index of consumer confidence rose this month to 129.6 points from a revised 127.9 last month.
“Despite a slight change in consumers’ short-term expectations, consumers continue to be bullish about the economy,” said Lynn Franco, associate director of the Conference Board’s Consumer Research Center.
The report supported recent indications that inflation is not sufficient to prompt the Federal Reserve Board to raise short-term interest rates at its upcoming policy meeting this Tuesday and July 2.
The overall index is the highest it has been since August 1969, when it reached 131.7 points.
Many economists had been expecting consumer confidence to fall this month, and bond prices edged lower when the numbers were released. But the bond market quickly recovered, with the yield on the 30-year Treasury bond dropping to 6.69% from Monday’s 6.70%. Meanwhile, the Dow Jones industrial average recovered most of its Monday losses, adding nearly 154 points to finish at 7,758.06.
Higher consumer confidence usually suggests that consumers will increase their spending, which could fuel inflation. But so far that hasn’t happened, said John Lonski, chief economist at Moody’s Investors Service, who notes that department store chain sales have been “less than robust,” and auto sales this month have been soft.
“What we had in the second quarter was a sharp upturn in consumer confidence accompanied by a pronounced deceleration of consumer spending,” Lonski said.
Also Tuesday, the Labor Department confirmed that inflation remained tame in May, based on its experimental consumer price index. The new gauge found prices were unchanged in May from a month earlier.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
From a monthly survey of 5,000 U.S. households. Index: 1985=100
Source: Conference Board