Consumer Confidence Slows Down in June

Consumers aren't as confident.

Consumers aren’t as confident.

This story first appeared in the June 27, 2007 issue of WWD.  Subscribe Today.

The Conference Board’s Consumer Confidence Index dropped to its lowest point in 10 months in June, falling to 103.9 from 108.5 last month. Economists had expected a reading of 105.

Both components of the index edged down, with the Present Situation Index declining to 127.9 from 136.1 and the Expectations Index decreasing to 87.9 from 90.1.

As a result, investors pulled back on the retail sector. At the market close, the S&P Retail Index fell slightly, 0.8 percent to 511.16, with its department store components closing down. Dillard’s Inc. lost 2.8 percent to $33.48, J.C. Penney Co. Inc. also slipped 2.8 percent, to $69.92, while Kohl’s Corp. cut 2.1 percent to $68.18. Nordstrom Inc., which sells higher-end products, fared better, shedding 0.9 percent to $50.20.

“A perceived softening in present-day business and employment conditions are the major reasons behind this month’s pullback in confidence,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “In fact, the Present Situation Index now stands at levels not seen since the final quarter of last year. Looking ahead, consumers remain rather subdued about short-term economic prospects. All in all, the glass remains half empty and half full.”

UBS economist Maury Harris in a research note said the index is at its “lowest level in 10 months, and corroborates the declines in other measures of confidence in June.”

The drop in June reflected consumers’ less-than-upbeat appraisal of present-day conditions, as well as fewer respondents who cited favorable gains on the jobs front.

Consumers claiming conditions were “good” declined to 27.4 percent from 29 percent, while those saying conditions were “bad” rose to 16.4 percent from 14.6 percent. Those who said jobs were “hard to get” inched up to 21.1 percent from 19.7 percent, while those who said jobs are “plentiful” fell to 27 percent in June from 29.1 percent last month.

Consumers who anticipate business conditions to improve over the next six months increased slightly to 16.1 percent from 15.3 percent, but those expecting business conditions to worsen edged up to 11 percent from 10.2 percent. Consumers who expect more jobs in the months ahead rose to 14 percent from 13.6 percent, while those anticipating fewer jobs also increased to 17 percent from 15.6 percent, The Conference Board said.

Harris is forecasting a 125,000 rise in payrolls and a 4.5 percent unemployment rate in the June employment report that will be out on July 6.