Consumer Confidence rebounds, but at what cost?
Consumer Confidence from the Conference Board increased for the fifth consecutive month as pandemic woes continued to fade. This month’s report showed broad strength, with both the Present Situation and Future Expectations components climbing higher. Gains in the Present Situation component were driven by more favorable views of the labor market. In fact, over 54% of consumers view jobs as “plentiful” versus only 11% who see them as “hard to get”, one of the widest differentials on record.
While this bodes well for consumer spending in the months ahead, it highlights that there is a shortage of labor that could lead to persistent wage inflation. According to the Conference Board’s survey, concerns about inflation are already present as consumers’ inflation expectations have surged to a 10-year high. This will be a key development to watch going forward, as the longer that inflation expectations remain elevated, the greater the risk of inflationary psychology taking hold.
