American consumers experienced a decrease in confidence in June, particularly in their expectations for the near-term future.
The Conference Board, a business research group, announced on Tuesday that the consumer confidence index dropped in June to 100.4 from 101.3 in May. However, the decrease was not as significant as analysts had predicted.
The index evaluates Americans’ perception of current economic conditions as well as their outlook for the upcoming six months.
In June, the assessment of Americans’ short-term expectations for income, business, and job market declined to 73 from 74.9 in May. A reading below 80 could indicate a potential recession in the near future.
On the other hand, consumers’ view of current conditions saw an increase in June, rising to 141.5 from 140.8 in May.
“Confidence dipped in June but remained relatively stable within the range observed over the past couple of years, with positive views on the current labor market outweighing concerns about the future,” stated Dana Peterson, the Conference Board’s chief economist.
Despite a slight increase in the unemployment rate to 4% in May, U.S. employers added a robust 272,000 jobs last month, indicating continued confidence in the economy and sustained hiring activity despite elevated interest rates.
Last month, significant job growth was driven by consumer spending on travel, entertainment, and other services, with U.S. airports reporting close to record traffic over the Memorial Day weekend.
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While job gains in May exceeded expectations, there are signs of weakening in the labor market, such as a decrease in job postings and a rise in the number of Americans receiving unemployment benefits over consecutive weeks.
President of the San Francisco Federal Reserve, Mary Daly, cautioned that while the labor market is currently healthy, impending slowdowns could lead to increased unemployment and need to be carefully monitored.
Although most economic indicators suggest the U.S. economy is in a strong position historically, there have been indications of a slowdown in growth.
In the first quarter of 2024, the nation’s economy decelerated significantly to a 1.3% annual pace, down from a robust 3.4% growth rate in the final months of 2023 due to high interest rates.
Retail sales only saw a marginal increase of 0.1% in May compared to April, influenced by elevated prices on essential items and restrained spending caused by high interest rates.
With inflation impacting consumer spending, major retailers are offering discounts this summer, as reflected in their latest quarterly earnings reports, which show that while consumers are still spending, they are more price-conscious and selective.
After rising for two consecutive months, consumer expectations of a recession within the next year declined in June, according to the Conference Board.
