June Consumer Confidence Down Nearly 10 Points
The Conference Board, New York, said its monthly Consumer Confidence Index fell by nearly 10 points in June to its lowest level since September 2017 amid uncertainty over economic conditions and the longer-term outlook.
The Index fell in June by 9.8 points to 121.5 from 131.3 in May, the largest single-month drop since 2015. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions – decreased from 170.7 to 162.6. The Expectations Index, based on consumers’ short-term outlook for income, business and labor market conditions, decreased from 105.0 last month to 94.1 this month.
“The decrease in the Present Situation Index was driven by a less favorable assessment of business and labor market conditions,” said Lynn Franco, Senior Director of Economic Indicators with The Conference Board. “Consumers’ expectations regarding the short-term outlook also retreated. The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence. Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers’ confidence in the expansion.”
Tim Quinlan, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said although consumer confidence remains solid for the second quarter, “unless confidence is restored, consumer spending in the second half is poised to slow.”
“Some retrenchment was expected, but today’s consumer confidence report instead showed that amidst an ongoing trade war and a soft May jobs report, consumers were downright shaken,” Quinlan said. “[But] even with this deterioration, confidence is still elevated by historical standards. The fallout here in June is likely attributable to concern about the trade war and an indication of vulnerability in the labor market.”
Quinlan noted consumer confidence numbers tend to be influenced by labor market developments. “While the labor market is still hot, it is not as hot as it was, according to consumers,” he said. “The rolling-over that we are seeing here in jobs plentiful is worryingly reminiscent of what we have seen late in prior cycles. It would be too soon to mark-down spending estimates for the second half; but if past patterns hold, without a turnaround in this series, job growth could slow in coming months.”
The report said consumers’ appraisal of current-day conditions declined in June. Those claiming business conditions are “good” decreased from 38.4 percent to 36.7 percent, however, those saying business conditions are “bad” also decreased, from 11.7 percent to 10.9 percent. Consumers’ assessment of the labor market was also somewhat less upbeat. Those saying jobs are “plentiful” decreased from 45.3 percent to 44.0 percent, while those claiming jobs are “hard to get” rose from 11.8 percent to 16.4 percent.
Consumers were less optimistic about the short-term outlook in June. The percentage of consumers expecting business conditions will be better six months from now decreased from 21.4 percent to 18.1 percent, while those expecting business conditions will worsen rose from 8.8 percent to 13.1 percent.
Consumers’ outlook for the labor market was also less favorable. The proportion expecting more jobs in the months ahead decreased from 18.4 percent to 17.3 percent, while those anticipating fewer jobs increased from 13.0 percent to 14.8 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement decreased from 22.2 percent to 19.1 percent, while the proportion expecting a decrease inched up from 7.8 percent to 8.0 percent.
