Consumer confidence inched up in June, after falling in May.
The Conference Board’s Consumer Confidence Index rose to 118.9, up slightly from 117.6 in May. The moderate gain was from an increase in the present situation component of the Index, which rose to 146.3 from May’s 140.6. The gain was offset by the other component, the expectations portion, which saw a decline to 100.6 from last month’s 102.3.
IHS Market Economist James Bohnaker said consumer confidence jumped ahead of itself when it rose earlier this year, and now that normalization appears to be over, the modest gains are supported mostly by a “healthy job market and a thriving stock market….Moreover, the stock market continues to breach new highs and home prices are steadily climbing as well, providing consumer confidence some positive reinforcement.”
Looking ahead, the economist said the “fundamentals for robust consumer spending are in place,” noting high levels of consumer confidence, rising real disposable income and gains in household net income. “We expect real consumer spending growth to be above 3 percent in the second quarter, since the first-quarter pullback was temporary,” he concluded.
Lynn Franco, director of economic indicators at The Conference Board, said, “Consumers’ assessment of current conditions improved to a nearly 16-year high. Expectations for the short-term have eased somewhat but are still upbeat. Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating.”
The last time the present situation component was higher was when it was at 151.3 in July 2001, the 16-year period noted by Franco. And in the past 12 months, December was the high point for the expectations component when it reached 106.4. Although it declined slightly this month, Franco’s comment about consumers still being upbeat on expectations is in line with results from the past 12 months, where the low was at 82 in July as the nation was heading into the final stretches of campaigning by candidates for the U.S. presidential election in November.
Consumers who said business conditions are good rose to 30.8 percent from 29.8 percent, while those who said conditions are “bad” fell to 12.7 percent from 13.9 percent. Their assessment of labor conditions was also more positive, with 32.8 percent saying jobs are “plentiful” from last month’s 30 percent. Those who believe jobs are “hard to get” slipped to 18 percent from 18.3 percent.
As upbeat as they were about current conditions, consumers were slightly less so about the short-term outlook, defined as six months out. Those who said they expect conditions to improve fell to 20.4 percent from 21.5 percent, while those expecting business conditions to worsen inched down to 9.9 percent from 10.3 percent. Perhaps more importantly, their outlook on the labor front was mixed. Those who expect more jobs in the months ahead rose to 19.3 percent from 18.6 percent, while respondents who expect fewer jobs rose to 14.6 percent from 12.1 percent. Further, consumers who expect an improvement in their income rose to 22.2 percent from 19.1 percent, but those who expect a decrease rose slightly to 9.2 percent from 8.7 percent.