July Consumer Confidence Mostly Unchanged
The Conference Board, New York, said its Consumer Confidence Index, which had posted a solid increase in June before the Brexit vote, held mostly steady in July.
The index now stands at 97.3, one basis point shy of June’s figure. The Present Situation Index increased from 116.6 to 118.3, while the Expectations Index edged down to 83.3 from 84.6 in June.
“Consumer confidence held steady in July after improving in June,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers were slightly more positive about current business and labor market conditions, suggesting the economy will continue to expand at a moderate pace.”
Franco noted that expectations regarding business and labor market conditions as well as personal income prospects declined slightly “as consumers remain cautiously optimistic about growth in the near-term.”
Wells Fargo Securities Economist Michael Brown called the consumer confidence figure “very solid.” He said the difference between indexes of individuals reporting plentiful jobs compared to people calling jobs hard to find returned to positive territory in July after slipping last month. He called the change a likely signal of continued firming in the labor market.
Consumers’ optimism regarding the short-term outlook turned slightly less favorable in July, The Conference Board reported. The percentage of consumers expecting business conditions to improve over the next six months decreased from 16.6 percent to 15.9 percent, while those expecting business conditions to worsen increased from 11.2 percent to 12.3 percent.
“Taking a look at our outlook for the remainder of the year, it is clear that in the absence of robust consumer spending the outlook for GDP growth would be quite grim,” Brown said, noting that Wells Fargo Securities forecasts 2.6 percent real second-quarter GDP growth with consumer spending contributing 3.1 percentage points to growth. “As we enter the second half of the year, we will be watching the consumer confidence indicators closely for early signs of a potential slowdown in consumer spending. Anything from geopolitical events to equity market sell-offs has the potential to erode consumer confidence and, in turn, begin to weigh on real consumer spending.”
Brown noted indicators such as corporate profits and business investment are beginning to show late business cycle behavior, “[but] it is time to focus on the only major support to GDP growth, consumer spending, for signs of softness,” he said. “Over the course of the next year growth will be a delicate balancing act between consumers supporting growth, soft business investment and a shock that could result in slower growth.”
