U.S. Consumer Confidence Strengthens in June

• The reading of current conditions increases sharply.

• Expectations improve again.

• All age groups feel better.

Broad improvement in consumer confidence in June reflected re-opening of the economy and fewer claims for unemployment insurance, according to the Conference Board. Their Index of Consumer Confidence jumped 14.2% (-21.1% y/y) this month to 98.1 following a 0.2% May increase, revised from 1.1%. Confidence was at its highest level since March. A decline to an index level of 90.0 had been expected in the Action Economics Forecast Survey. Over the last 20 years, there has been a 60% correlation between the level of confidence and the y/y change in real consumer spending.

The index of current conditions surged 26.0% to the highest level since March, but remained nearly one-half below the level twelve months earlier. A slightly higher 17.4% of respondents felt that business conditions were good, but a significantly reduced 43.2% felt that they were bad. Jobs were viewed as plentiful by a higher 20.8% of respondents, half of those who felt so in June 2019. Jobs were viewed as hard to get by a lessened 23.8% of respondents, down from 34.5% in April.

The index of expected business conditions in six months rose 8.6%, following a 3.5% rise in May. An improved 42.6% of respondents felt that would business conditions would improve, up from the low of 18.7% in March. Thirty-eight percent of respondents felt that there would be more jobs in six months, down slightly from April but up from 15.5% in December. These were accompanied by a slight improvement in earnings expectations. A still weak 15.1% of respondents felt that income would improve.

Expectations for the inflation rate in twelve months strengthened to 6.7% and added to May's increase. It was the highest level since March 2011, up from 4.4% this past January. Interest rates were expected to move higher in twelve months by 40.3% of respondents, up from 35.5% in March but still nearly half the 2018 high. An improved 1.7% planned to buy a new home. A steady 4.0% planned to buy a new car within six months while a lessened 45.5% planned to buy a major appliance, down from February's high of 55.0%.

By age group, the index of confidence amongst those under age 35 jumped by roughly one-third (-1.9% y/y) followed by improvement amongst older individuals. For respondents over age 55, confidence improved 14.0% (-20.3% y/y). For those aged 35-54, confidence gained 8.8% (-28.8% y/y).

The Consumer Confidence data are available in Haver's CBDB database. The total indexes appear in USECON, and the market expectations are in AS1REPNA.

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