Consumer Confidence Stumbles in June

Following two months of dramatic growth, the Consumer Confidence Index has retreated slightly, according to the Conference Board. The Index stands at 49.3 for June, 2009, down from an adjusted score of 54.8 in May, reports Retailer Daily.

The index, based on the Conference Board’s Consumer Confidence Survey, comprises the Present Situation Index, which decreased from 29.7 in May to 24.8 in June, and the Expectations Index, which fell from 71.5 in May to 65.5 in June.

Brief highlights from each index follow.

Present Situation Index

The percentage of consumers rating current business conditions as “bad” increased from 44.5% in May to 45.6 in June, while the percentage rating current business conditions as “good” decreased from 8.8% to 8%. The percentage of consumers who think jobs are hard to get increased from 43.9% to 44.8%, while those who think jobs are plentiful decreased from 5.8% to 4.5%.

Expectations Index

Consumers’ expectations for the next six months also took a downturn in June. The percentage of consumers anticipating an improvement in business conditions during the next six months decreased from 22.5% to 21.2%, while those expecting conditions will worsen increased from 18% to 20.2 %.

Consumers also took a more pessimistic job outlook for the next six months, the research found. The percentage of consumers anticipating more jobs in the months ahead decreased from 19.3% to 17.4%, while those anticipating fewer jobs increased from 25.6% to 27.3%. The percentage of consumers expecting an increase in their incomes declined from 10.8% to 9.8%.

Lynn Franco, director of the Conference Board Consumer Research Center, said consumers’ less favorable assessment of present and future business conditions and employment implies the economy is still weak. “Looking ahead, (consume expectations) continue to suggest less negative conditions in the months ahead, as opposed to strong growth,” she said.

Despite the drop in consumer confidence levels, there have been recent signs of economic improvement. Consumer spending, personal income and disposable personal income all rose in May 2009, although consumer saving levels also significantly increased. In addition, growth of the national trade deficit dropped by roughly 50% between March and April 2009. In another negative economic sign, however, US unemployment hit 9.4% last month.

About the index: The Consumer Confidence Survey is based on a representative sample of 5,000 US households. The monthly survey is conducted for The Conference Board by TNS. The cutoff date for June’s preliminary results was June 23, 2009. The next release is scheduled for Tuesday, July 28, 2009.

Comments

[conceptwizard:]

By Today, many US state governments must pass budgets for the coming fiscal year. The state capitals are now the scene of bitter feuding among governors and legislators over how the deficits will be met. But there is unanimity that the working class must foot the bill.

Forty-six states confront significant deficits, and their collective shortfall for 2010 stands at more than $130 billion. This comes after a $104 billion deficit in 2009, for a two-year total of $234 billion in red ink—$91 billion more than President Barack Obama’s stimulus package allocated to all municipalities and the 50 states for the next two years.

At its heart, the state budget crises are driven by the recession and the impoverishment of the working class. Layoffs and wage cuts are rapidly diminishing returns on state and local taxation—income, sales, and property taxes. At the same time, increasing numbers of unemployed workers and their families are turning to state-administered social safety programs already woefully unprepared for hard times.

Now, as the fiscal year approaches its June 30 end, the budget crisis is being used by Democratic and Republican governors alike to launch a new attack in the social position of the working class. This will be carried out through cuts to social programs, education, and transportation; layoffs and wage and benefit cuts for state workers; and regressive forms of taxation targeting the spending and income of working class households.

State-level income tax collections plummeted 26 percent in the first quarter of 2009 from the same period last year, according to a recently released analysis by the Nelson A. Rockefeller Institute of Government. Another new study, by the National Governors Association, shows that sales tax revenue has fallen 3.2 percent over the previous year—the biggest decline on record—and corporate income tax has tumbled by 15.2 percent.

We'll see how this boosts consumer confidence.

Jun 30 07:47 PM

[Moon Kil Woong:]

Great spending and savings are both rising. That alone makes a good case for inflation. On top of that, according to statistics people are getting paid more (hmmm must be Citibank and others because I don't know a single person getting higher salaries). Oh, that is unless so many low end jobs are falling off due to also rising unemployment that the average salary is rising. This makes a great beginning case case for stagflation.

I am surprised to see a fall of in consumer cofidence. It is often a lagging indicator more than a leading one. If it remains true to form that means something is strangely wrong with the other reported signs of economic health recently. Like, the ballyhoo about new home purchases without statements showing jumbo home loans have dropped to almost 0 and banks are refusing all loans unless they can immediately dump them off on the taxpayer through Fannie Mae and freddie Mac (is this healthy)? Or the proof that there is a recovery because of rising oil prices when oil reserves are now reaching record highs (proving it's not rising because of an economic recovery or in demand). Or that bond prices have strong foreign demand because the Fed now qualifies US secondary buyers as foreigners. Or banks are profitable because they don't have to mark-to-market and can keep refusing to acknowledge their derivatives losses. Or inflation is tame because the numbers today are so fudged thay are laughable (that's why they home loans are based on Libor now). Or the fact that rising consumer spending can almost be completely attributable to rising energy prices.

It is very believable that in fact, the US is not getting better at all but is getting worse because they are facing the market's 2nd worst enemy: inflation (I think it's fair to say a reckless government and Fed are the worst free market enemy).

Jul 01 01:47 AM

[Ted Hurlbut:]

Let's look at this over a longer period than one month. One data point does not make a trend. Consumer confidence had been improving for the last few months prior to this report. It's going to take several more months before we can put this report in perspective.

Jul 01 01:27 PM