After a sharp increase last month, a key gauge of US consumer confidence rose further in July, suggesting lower inflation and, just maybe, rising stock and home prices, are emboldening Americans who are still waiting on that recession so many economists said was a foregone conclusion.

The Conference Board’s gauge printed 117 for July, five points ahead of consensus and the highest in two years. Last month’s already solid print was revised up.

“Headline confidence appears to have broken out of the sideways trend,” Dana Peterson, Chief Economist at The Conference Board, declared, editorializing around the rather dramatic inflection illustrated below.

The better mood wasn’t confined to any specific income cohort or demographic. Both high earners and lower-income households contributed to the upturn, and the improvement was “evident across all age groups,” the release said.

Notably, the expectations gauge — which had loitered below the threshold typically associated with an oncoming recession — now sits nearly nine points above the danger line.

In a development that doesn’t bode particularly well for a Fed determined to cool the jobs market, the labor differential expanded again, reaching the widest in five months. That’s “a strong indication for next week’s employment numbers,” BMO’s Ben Jeffery remarked. Anderson attributed the improvement in the expectations gauge to “consumers’ belief that labor market conditions will remain favorable.”

Still, there was some evidence of retrenchment or, if that’s too strong, call it caution. Consumers don’t expect to spend as much on discretionary items in the months ahead, for example, and anticipate spending more on necessities and “cheaper services like streaming” (good news for Netflix, I suppose).

The perceived likelihood of a recession over the next 12 months (computed by combining responses from those who indicated a downturn is either “somewhat” or “very” likely) peaked earlier this year at around 73%. That measure actually moved up in July, but increases on the main confidence gauge, the two key underlying aggregates and the wider labor differential are what markets will focus on.

Suffice to say the animal spirits are stirring. As BMO’s Jeffery put it, the confidence print “shows little indication of an impending slowdown in consumption despite higher rates.”