The Conference Board’s Consumer Confidence Index hit 109.7 in June, reaching a 17-month high and topping expectations, marking the highest monthly reading since January 2022 and a pickup from 102.5 in May.
Economists polled by Reuters had expected the Index to climb to 104.0.
Based on consumers’ assessment of current business and labor market conditions, the Present Situation Index rose to 155.3 (1985=100) from 148.9 last month. Based on consumers’ short-term outlook for income, business, and labor market conditions, the Expectations Index rose to 79.3 (1985=100) from 71.5 in May. Expectations have remained below 80, the level associated with a recession within the next year, every month since February 2022, except for a brief uptick in December 2022. However, June’s reading was just a shade below 80 and up sharply from last month’s print.
“Consumer confidence improved in June to its highest level since January 2022, reflecting improved current conditions and a pop in expectations,” said Dana Peterson, chief economist at The Conference Board. “Greater confidence was most evident among consumers under age 35 and consumers earning incomes over $35,000. Nonetheless, the expectations gauge continued to signal consumers anticipating a recession at some point over the next 6-to-12 months.
“Assessments of the present situation rose in June on sunnier views of both business and employment conditions. Indeed, the spread between consumers saying jobs are ‘plentiful’ versus ‘not so plentiful’ widened, indicating upbeat feelings about a labor market that continues to outperform. Likewise, expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability.
“While income expectations ticked down slightly in June, new questions included in this month’s release found a notably brighter outlook for consumers’ family finances: Around 30 percent expect their family’s financial situation to be ‘better’ in the next six months, compared to less than 14 percent expecting it to be ‘worse.’ This might reflect consumers’ belief that labor market conditions will remain favorable and that there will be further declines in inflation ahead. Indeed, the 12-month forward inflation expectations gauge fell to 6 percent in June, the lowest reading since December 2020.
“Although the Expectations Index remained a hair below the threshold signaling recession ahead, a new measure found considerably fewer consumers now expect a recession in the next 12 months compared to May. Meanwhile, on a six-month moving average basis, plans to purchase autos and homes have slowed after picking up earlier in 2023. This may reflect rising costs to finance big-ticket items as the Fed continues to raise interest rates. Meanwhile, vacation plans within the next six months continued to flag, led largely by declines in plans to travel domestically. This is an important indicator of desires to spend on services ahead, which may be a signal that post-pandemic ‘revenge spending’ on travel may have peaked and is likely to slow over the rest of this year,” concluded Peterson.
