Consumer Confidence Recovers in June

“Consumer confidence improved in June to its highest level since January 2022, reflecting improved current conditions and a pop in expectations,” said Dana Peterson, The Conference Board’s chief economist. “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 six to 12 months.”

The Present Situation Index, which measures consumer sentiment toward current business and labor market conditions improved in June, recovering from a decline the month prior. The index rose 6.4 points to 155.3. The Expectations Index, which assesses the short-term outlook for income, business, and labor market conditions, rose to 79.3, up 7.8 points from a reading of 71.5 the month prior.

Calculated as a three-month moving average (3MMA) to smooth out volatility, The Conference Board’s Composite Index was 105.3, a 1.9-point increase vs. May, and increasing for the first time since February.

The Composite Index is made up of two sub-indexes: consumers’ view of the present situation and their expectations for the future. Figure 1 below notes the 3MMA linear trend lines from January 2013 through June 2023 vs. the trend lines of all three subcomponents of the index: Present Situation, Composite, and Future Expectations. All three were above the average composite line of 94.5 prior to the pandemic before falling consecutively through February 2021. The surge from March through June of 2021 pulled all three indexes above the composite line once again. But economic uncertainty continues to weigh on expectations.

The table below compares June 2023 with June 2022 on a 3MMA basis. The headline index and both of its two sub-indexes have been on the rise on a year-on-year (YoY) basis. Present Situation has seen the strongest gain, though growth for all three remains somewhat subdued.

When compared to the same 2019 pre-pandemic period, the Composite Index is down 23 points on a 3MMA basis. The Present Situation is down 16 points, while the Expectations reading is down 27.6 points this month when compared to the same period in 2019. The Consumer Confidence report includes employment data and purchase plans. These are summarized in the table below.

People found jobs more plentiful in June but were less optimistic about wage increases compared to the prior month, the report said, noting “the spread between consumers saying jobs are ‘plentiful’ vs. ‘not so plentiful’ widened, indicating upbeat feelings about a labor market that continues to outperform.”

The differential between those finding jobs and those having difficulty was 34.4 in June, up from 30.7 in May. The measure, though up month-on-month (MoM), is still trending further away from the most recent high of 40.71 seen earlier this year. The difference between those expecting wages to rise vs. those expecting wages to fall is 5, down 2.5 points MoM, and well removed from the recent high of 11.6 in June 2021.

But while income expectations ticked down slightly in June, the outlook for consumers’ family finances improved, according to the report. “This might reflect consumers’ belief that labor market conditions will remain favorable and that there will be further declines in inflation ahead.”

Buying intentions for big-ticket items — cars, homes, and major appliances — were mostly unchanged in June, though they were all trending down vs. month-ago levels.

The share of consumers planning to buy motor vehicles and appliances such as refrigerators and washing machines both declined MoM, down 1.0 and 1.5 points, respectively. Home buying plans edged down 0.4 points in June vs. May.

These recent dynamics and historical movements are illustrated below in Figure 2.

Note: The Conference Board is a global, independent business membership and research association working in the public interest. The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen. The index is based on 1985 = 100. The composite value of consumer confidence combines the view of the present situation and of expectations for the next six months.

By David Schollaert, david@steelmarketupdate.com