Consumer Confidence Slightly Weakens in June

The Conference Board's Consumer Confidence Index® slightly weakened in June. The index fell to 100.4 this month from May's downwardly revised 101.3. This month's reading was better than expected, exceeding the 100.0 forecast.

The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, increased to 141.5 in June from 140.8 in May. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, fell to 73.0 in June from 74.9 in May. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year.

“Confidence pulled back in June but remained within the same narrow range that’s held throughout the past two years, as strength in current labor market views continued to outweigh concerns about the future. However, if material weaknesses in the labor market appear, Confidence could weaken as the year progresses,” said Dana M. Peterson, Chief Economist at The Conference Board.

“Consumers expressed mixed feelings this month: their view of the present situation improved slightly overall, driven by an uptick in sentiment about the current labor market, but their assessment of current business conditions cooled. Meanwhile, for the second month in a row, consumers were a bit less pessimistic about future labor market conditions. However, their expectations for both future income and business conditions weakened, weighing down the overall Expectations Index."

"The decline in confidence between May and June was centered on consumers aged 35-54. By contrast, those under 35 and those 55 and older saw confidence improve this month. No clear pattern emerged in terms of income groups. On a six-month moving average basis, confidence continued to be highest among the youngest (under 35) and wealthiest (making over $100K) consumers.”

Peterson added: “Compared to May, consumers were less concerned about a forthcoming recession. However, consumers’ assessment of their Family’s Financial Situation—­­both currently and over the next six months—was less positive.” (These measures are not included in calculating the Consumer Confidence Index®)

Read more

Background on the Consumer Confidence Index

The Conference Board Consumer Confidence Index measures the consumers attitudes and confidence in the economy, business conditions, and labor market, with higher readings indicating higher optimism. The general assumption is that when consumers are more optimistic they will spend more and stimulate economic growth. However, if consumers are pessimistic then spending will decline and the economy may slow down. The index is based on a 5 question survey, with 2 questions related to present conditions and 3 questions related to future expectations. The survey began in 1967 and was conducted every two months but changed to monthly reporting in 1977, which is where our data begins.