Consumer confidence in the U.S. improved for the third consecutive month in July, according to a report released by the Conference Board on Tuesday, with the consumer confidence index jumping to its highest level in almost seven years.
The Conference Board said its consumer confidence index surged up to 90.9 in July from an upwardly revised 86.4 in June.
Economists had been expecting the index to inch up to a reading of 85.4 from the 85.2 originally reported for the previous month.
With the much bigger than expected increase, the consumer confidence index reached its highest level since hitting 95.2 in October of 2007.
However, Paul Ashworth, Chief U.S. Economist at Capital Economics, warned that the sharp jump by the consumer confidence index looks a bit suspicious.
"Admittedly, it might be that the Conference Board's survey captured more of the most recent drop back in gasoline prices." Ashworth said. "But we still wouldn't be surprised if this index dropped back in August."
"Nevertheless, more generally, most of the drivers of confidence are improving, just not quite so dramatically," he added. "Stock markets are still trending higher, interest rates remain low and labor market conditions appear to have strengthened."
The jump by the headline index was partly due to a significant improvement in consumer expectations, as the expectations index soared to 92.7 in July from 86.4 in June.
The Conference Board said the percentage of consumers expecting business conditions to improve over the next six months rose to 20.2 percent from 18.4 percent, while the percentage expecting conditions to worsen held steady at 11.5 percent.
Consumers were also more optimistic about the outlook for the labor market, as those expecting more jobs in the months ahead climbed to 19.1 percent from 16.3 percent, while those anticipating fewer jobs fell to 16.4 percent from 18.4 percent.
The report also showed an improvement in consumers' assessment of current conditions, with the present situation index climbing to 88.3 in July from 86.3 in June.
The improvement reflected a more favorable appraisal of the job market, as consumers saying jobs are "plentiful" increased to 15.9 percent from 14.6 percent, while those claiming jobs are "hard to get" remained unchanged at 30.7 percent.
Meanwhile, the Conference Board said the percentage of consumers claiming current business conditions are "good" edged down to 22.7 percent from 23.4 percent, while those saying conditions are "bad" was virtually unchanged at 22.7 percent.
Lynn Franco, Director of Economic Indicators at the Conference Board, said, "Strong job growth helped boost consumers' assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations."
"Recent improvements in consumer confidence, in particular expectations, suggest the recent strengthening in growth is likely to continue into the second half of this year," she added.
Friday morning, Thomson Reuters and the University of Michigan are scheduled to release their revised report on consumer sentiment in the month of July.
The consumer sentiment index for July is expected to be upwardly revised to 81.5 from the preliminary reading of 81.3, which was below the final June reading of 82.5.
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