United States: Consumer confidence regains lost ground in June
June 27, 2017
The Conference Board’s consumer confidence index rebounded moderately in June after having decreased for a second straight month in May. The index rose from a revised 117.6 in May (previously reported: 117.9) to 118.9 in June, well above market expectations of a third consecutive decrease to 116.7. As a result of June’s pick-up, the index now remains further above the 100-point threshold that separates optimism from pessimism among consumers.
June’s details were mixed. The increase in the headline figure was driven by a noteworthy improvement in consumers’ assessment of the present economic conditions, which in June neared a 16-year high. This was largely the result of yet another improvement in consumers’ views regarding the job market, as the labor differential—the difference between the percentage of respondents that state that jobs are plentiful and those that say they are hard to get—widened yet again in June.
Conversely, consumers were less optimistic for a third month running regarding future economic and labor conditions, which continues to suggest that consumers are becoming increasingly skeptical about President Donald Trump’s ability to deliver on promises to boost the U.S. economy. Another important caveat was the outlook on inflation, which inched down to 4.6%.
The unusual strength displayed by recent consumer confidence readings has so far failed to translate into stronger consumer spending. Retail sales disappointed yet again in May, while softening inflation indicates subdued demand-pull inflationary pressures. Nonetheless, the ongoing tightening in the labor market should eventually bring about higher salaries, which would provide consumer spending with a lifeline and shore up growth.
Author: David Ampudia, Economist