Consumer Confidence Declines in June Amid Concerns Over Economic Outlook

Consumer Confidence Declines in June Amid Concerns Over Economic Outlook

Consumer confidence fell off a cliff in June, wiping out almost half of the strong advances seen in May. This steep drop signals increasing confusion among consumers about how the current and near-term economic climate is shaping up. The Present Situation Index, a key barometer of consumer mood, dropped 6.4 points to 129.1. This sudden drop does signal a dramatic change in how Americans feel about the state of our economy.

In June, 19% of consumers rated business conditions as “good,” and 15.3% as “bad.” The survey found that 24% of consumers are concerned that overall conditions for doing business might degrade. Just 16.7% think that these circumstances will improve. Consumer Sentiment This change in the consumer mood is a staggering indicator as optimism about the economy keeps getting kicked further down the road.

Present Situation Index Shows Significant Drop

The Present Situation Index is a key barometer for consumer confidence. Without a doubt, while sentiment has fallen, this measure remains at an impressive 129.1. This means that more consumers are still viewing current conditions favorably. The pronounced decline of 6.4 points is cause for concern, as it reflects a much more conservative view with consumers taking stock of their fiscal realities.

Stephanie Guichard, an economist, noted, “Consumer confidence weakened in June, erasing almost half of May’s sharp gains.” This drop is a sign that more and more consumers are beginning to experience the impact of economic uncertainty on their daily lives.

Even the measure of current business conditions is positive in the same regard. Yet only 17 percent of consumers are confident about the broader economic picture. This lower spending confidence is worrisome for future consumer spending overall and economic growth as a whole.

Expectations Index Reflects Growing Pessimism

In June, the Expectations Index lost 4.6 points, coming in at 69.0. This index tracks consumers’ expectations for the next half-year. Even worse, this figure is a long way from the 80+ magic number that would generally signal optimism in consumers. The drop was not only the largest observed during the pandemic, but broad-based across all components of consumer confidence.

Guichard stated, “The decline was broad-based across components, with consumers’ assessments of the present situation and their expectations for the future both contributing to the deterioration.” This trend indicates that consumers are growing more concerned about the prospects of jobs and the economy as a whole.

The largest share of respondents said they were worried about their ability to earn a living in the future. This was the most surprising data point in our member survey. Fifty-seven percent of respondents said they thought interest rates would go up. This expectation would dramatically impact consumer spending, driving investment decisions.

Economic Indicators Show Mixed Signals

Even with all the pessimism about business conditions and the expectations for the economy in general, there is a glimmer of positivity. Please note that 45.6% of consumers do think stock prices will increase over the next 12 months. The increase marks a moment of building confidence regarding the future prosperity of the stock market.

Demand to buy cars has jumped up to its highest point since last December. Which means that despite big-picture worries, there is still plenty of activity happening in healthier pockets of the consumer market. Intention to take a vacation held steady in June, showing that as many consumers run out of savings, others are still making leisure spending a priority.

Guichard warned that “Consumers were more pessimistic about business conditions and job availability over the next six months, and optimism about future income prospects eroded slightly.” These positive/negative indicators highlight the confusing picture of today’s economy. Though some consumers are ready to open their wallets, plenty more are still scared and shell-shocked.

Tags