The Higgins Report: The Consumer to the Rescue

Rising consumer confidence bodes well for the economy

By Joe Higgins, Quest 4 Quality

The Conference Board’s Consumer Confidence Index rose to 109.7 in June from 102.5 in May. A reading over 100 is generally considered a sign of an expanding economy and a signal that consumers will consider spending money. Economists were expecting an increase to 103.9.

The increase surprised the experts, and the seven-point gain pushed the index to its highest level in 18 months as spending and job creation strengthened the U.S. economy. 

Confident consumers are another indication that recession is not in our immediate future. Before the Great Recession in 2008, consumer confidence dropped to an historic low of 34.6, the lowest level ever recorded in U.S. history. An index number this low suggested two things about the recession: how painful it would be and how long it would last. The Great Recession pushed unemployment to 10% and lasted 18 months, and so consumer confidence remains an essential predictor of the dynamics of any recession. 

Job creation and spending have been strong despite the Federal Reserve’s 14-month-long action of raising interest rates ten times for a total of 500 basis points. Usually, moves like this would have already devastated the economy, but through it all consumers have gone out, found jobs and continued spending on goods and services. Meanwhile, the Consumer Price Index has declined from 9.1% in June 2022 to 3% this year, so America has successfully reduced inflation. The trouble is that while a 3% inflation rate represents a significant decrease, it is still higher than the Federal Reserve’s goal of 2%.  

There is talk that the Fed could raise its goal to 3%, and with interest rates projected to fall to 3.6% by Christmas, it could stop raising rates this year. Fed Chair Jerome Powell and his team have paused rate hikes for now, but it is also believed that we will see a 25-basis point increase in July and another later in the year. Also, the Fed wants to give a little more time to allow the current rates to work at slowing the economy, to a point where it will lower inflation to 2%. 

In the June Consumer Confidence report, nearly 50% of respondents reported an ample number of jobs. Indeed, there are almost two jobs for every unemployed person in the U.S., which is the highest job availability in U.S. history. 

The economy also added 339,000 jobs in May and a revised 299,000 jobs in April. Normally a significant job creation number is somewhere between 150,000 to 200,000, so this is strong employment growth. No doubt this is needed as many small and large businesses are still reporting a shortage of workers, especially in the leisure and hospitality sectors of the economy. 

Headwinds for the economy are out there; for example, credit card use has hit the highest level ever at $986 billion, and manufacturing, according to the latest ISM Report from the Institute for Supply Management, has been down 11 of the past 12 months. What’s more, GDP has shifted gears from a 5.7% gain in 2021 to a 1.1% increase year-to-date in 2023. These results are the mark of a slowdown and a potential recession. 

The news of a resumption of payments for student loans has economists concerned about the impact of somewhere between $5 billion and $10 billion in monthly charges. And while this works out to between $200 to $350 a month in out-of-pocket costs for consumers with student loans, it is still tiny compared to the $1.7 trillion in personal spending that occurs each month. 

The Bottom Line

Consumer confidence, personal spending and employment are some of the most critical indicators for our economy. After 14 months of raising interest rates and a desperate attempt by the Fed to reduce spending, lending and job creation, the economy is still looking good. Confident consumers are the bedrock of our strength as a nation, and they have been through a lot over the past year. Our business areas — appliances, furniture and consumer electronics — have slowed as Americans opt for services like travel and leisure, but they will be back.

Joe Higgins is a 46-year veteran of GE and Whirlpool Corp. who brings his executive experience to bear as a business consultant, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at

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