WASHINGTON – American consumers give today’s economy the highest grade in more than 16 years.
The Conference Board said Tuesday that consumers’ assessment of current economic conditions hit the highest level this month since July 2001. The business research group’s overall consumer confidence index, which takes into account Americans’ views of current conditions and their expectations for the next six months, rose to 122.9 in August from 120 in July.
Americans’ spirits have been lifted by a healthy job market. Employers added a robust 209,000 jobs in July, and the unemployment rate has dropped to a 16-year low of 4.3 percent.
The Conference Board found that 34.5 percent of respondents described business conditions as “good” – the highest percentage since January 2001. Similarly, 35.4percent described jobs as “plentiful” – most since July 2001.
The overall index hit bottom at 25.3 in February 2009 at the depths of the Great Recession before rebounding at the U.S. economy recovered.
Economists pay close attention to the numbers because consumer spending accounts for about 70 percent of U.S. economic activity.
U.S. home prices climbed higher in June with gains that are eclipsing income growth – creating affordability pressures for would-be buyers.
The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index rose 5.7 percent in June, according to a Tuesday report. The separate national average rose as well, putting it 4.3 points above its housing bubble-era peak in July 2006.
The price increases are different from the bubble period, when subprime mortgages led to a housing bust. There is a shortage of properties for sale, causing the prices to steadily rise at more than double the pace of average hourly earnings. Buyers are also relying on historically low mortgage rates to ease the affordability pressures. Cheaper borrowing costs have kept buyer demand strong despite the price increases.