Americans feel more fragile about the economy in June

CNN
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U.S. consumer confidence wavered slightly in June as Americans became a bit more wary about the future, according to new data released Tuesday.

The Conference Board’s latest consumer confidence index fell to 100.4 in June from a downwardly revised 101.3 in May. The June figures correspond to economists’ expectations.

Measures of American confidence are generally closely watched, as consumer spending accounts for nearly 70% of U.S. economic activity. But this importance is even greater today, with the US presidential election approaching in a few months.

“The details continue to demonstrate a hesitant, but not overly concerned, consumer,” Wells Fargo economists Shannon Seery Grein and Jeremiah Kohl wrote in a note to investors Tuesday.

Americans felt better about the job market, which outweighed their worries about the future; However, consumer sentiments toward current business conditions have cooled, noted Dana Peterson, chief economist at the Conference Board.

“However, if significant weaknesses emerge in the labor market, confidence could weaken as the year progresses,” she said in a statement.

Americans felt different levels of confidence in different sectors of the economy.

The Current Situations Index rose from 140.8 to 141.5 (its highest level since March); However, the expectations index fell to 73, marking the fifth consecutive month below 80, which the Conference Board considers a threshold signaling an impending recession.

The expectations index has been at or above this potential recession threshold just six months since March 2022, when escalating inflation forced the Federal Reserve to launch a historic rate-tightening campaign.

Inflation has slowed significantly over the past two years, but remains above the central bank’s 2% target. Interest rates remain at their highest level in 23 years and have helped dampen demand.

The consumer confidence index released Tuesday reflects this, according to Ian Shepherdson, chief economist at Pantheon Macronomics.

“In a nutshell, (the index is) consistent with a slowdown in consumption growth and a slight increase in the unemployment rate,” he wrote.

The Conference Board Confidence Index and the University of Michigan Consumer Confidence Index, released twice monthly, are two of the leading indicators of consumer attitudes toward current and future strength economy.

Although the two indexes generally move similarly over time, the Consumer Confidence Index is more influenced by employment and labor market conditions, while the Michigan Confidence Index emphasizes more focus on household finances and the impact of inflation.

Michigan’s preliminary index results for June, released earlier this month, showed sentiment levels at a seven-month low.

The final, and very critical, reading of inflation will come Friday when the Commerce Department releases Personal Consumption Expenditures Price Index data for May. The PCE index, which measured 2.7% in April, is the Fed’s preferred inflation gauge.