Today’s report on Consumer Confidence for the month of July exceeded forecasts and remained above its long-term average of 93.4.  While economists were forecasting the headline index to come in at a level of 96.0, the actual reading came in at 97.3, which was a slight decline from last month’s revised reading of 97.4.  After a steady trend higher from 2009 through late 2014, Consumer Confidence has plateaued over the last 18 months.

While the headline reading was better than expected, the real story was in the internals.  Two we want to touch on are confidence by income level and consumer views regarding interest rates.  In the case of confidence based on income levels, we have made numerous mentions over the last several years regarding the divergent paths of confidence of ‘middle income’ consumers and ‘upper income’ consumers.  During this recovery, confidence among consumers with incomes above $50K outpaced confidence levels of consumers with incomes between $35K and $50K by record amounts.  In this month’s report, though, we saw confidence among ‘middle income’ consumers surge by 19% to its highest level since August 2007.  Meanwhile, confidence among consumers with incomes above $50k actually declined.  As a result of these moves, the gap in confidence between these two groups is at its narrowest level since March 2009!

Another interesting aspect of today’s Consumer Confidence report is the collective view towards interest rates.  In the July report, 13.6% of consumers expected interest rates to decline from current record low levels.  This is the highest reading in three and a half years.  At the same time, 51.7% of consumers expect interest rates to increase, but that reading was actually down from 59.4% last month and is the lowest level since May 2013.  It’s hard to imagine interest rates getting much lower than they are now, but then again, we probably would have said the same thing a year ago too.