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People buy drinks at a store on a muggy afternoon in Brooklyn, New York, on the first day of summer, June 21, 2024.
CNN
—
New data released Tuesday showed U.S. consumer confidence was slightly more shaky in June as Americans became slightly more cautious about the future.
The Conference Board’s latest consumer confidence index fell to 100.4 in June from a downwardly revised level of 101.3 in May.
The June figures were in line with economists’ expectations but confirmed a consistent theme: Despite continued economic growth and a historically strong labor market, Americans say persistently high inflation and interest rates are making them increasingly confident.
“Details continue to suggest that consumers are hesitant but not overly concerned,” Wells Fargo economists Shannon Seely Grein and Jeremiah Cole wrote in a note to investors on Tuesday.
Separate survey data released Tuesday by the Federal Reserve Bank of Philadelphia’s Institute for Consumer Finance showed that while respondents maintained an overall positive outlook on the economy, more than a third of them expressed concerns about making ends meet over the next seven to 12 months.
A measure of American confidence is usually closely watched because consumer spending accounts for roughly 70% of U.S. economic activity, but it’s even more important now with the U.S. presidential election just months away.
The future remains bleak
Americans have a positive view of the labor market that outweighs concerns about the future, according to a new report from the Conference Board, but consumer sentiment about the current state of the economy is tepid, said Dana Peterson, chief economist at the business membership and research organization.
“However, confidence could weaken as the year progresses if significant weakness emerges in the labor market,” she said in a statement.
consumer I felt there were different levels of confidence in different parts of the economy.
The current conditions index rose to 141.5 from 140.8 (the highest level since March), but the expectations index fell to 73, the fifth consecutive month below 80, the level the Conference Board considers a sign of a recession.
The expectations index has been above the threshold for a potential recession for just six months now, since March 2022, when soaring inflation forced the Federal Reserve to launch a historic interest rate tightening campaign.
Inflation has fallen sharply over the past two years but remains above the central bank’s 2% target, and interest rates remain at a 23-year high, dampening demand.
A strong job market is boosting consumer spending and helping to revitalize the economy, but the twin pressures of rising inflation and high interest rates are weighing on some people. Credit card balances are rising and delinquencies are on the rise.
The Philadelphia Fed’s latest Labor, Income, Finances, and Expectations (LIFE) Survey revealed a year-over-year surge in worries about making ends meet. In April 2024, 26.2% of respondents who said they could pay all their bills expressed concern about being able to make payments within the next six months. This is up from 20.7% in April 2023.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said Tuesday’s consumer confidence reading reflected a further slowdown in spending growth going forward.
“In a nutshell, (the index) is consistent with slowing consumption growth and a moderate rise in the unemployment rate,” he wrote.
The Conference Board’s Confidence Index and the University of Michigan’s twice-monthly Consumer Sentiment Index are two of the leading indicators of consumer attitudes about the current and future strength of the economy.
While the two indexes typically behave similarly over time, the Consumer Confidence Index is more influenced by employment and labor market conditions, while the Michigan Sentiment Index places more emphasis on household finances and the impact of inflation.
Preliminary June readings of the Michigan Index, released earlier this month, showed sentiment levels at their lowest in seven months.
The latest and most important measure of inflation will be released on Friday, when the Commerce Department releases its Personal Consumption Expenditures Price Index data for May. The PCE index, which rose 2.7% in April, is the Fed’s preferred inflation gauge.
