Consumer Confidence Falls Much More Than Expected In June

Conscon 062408

Consumer confidence has experienced a substantial deterioration in the month of June, according to a report released by the Conference Board on Tuesday, with the group's index of consumer confidence falling much more than expected.

The Conference Board said its consumer confidence index fell to 50.4 in June from a revised 58.1 in May. Economists had been expecting a more modest decline to a reading of about 56.0 compared to the 57.2 originally reported for the previous month.

With the decrease, the index fell to its fifth lowest reading ever, reaching its lowest level since hitting 47.3 in February of 1992.

Lynn Franco, Director of the Conference Board Consumer Research Center said, "Consumers' assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear."

The report showed that the present situation index fell to 64.5 in June from 74.2 in May. The decrease came as those claiming business conditions are "bad" increased to 32.5 percent while those claiming business conditions are "good" declined to 11.5 percent.

Consumers were also more pessimistic about the job market, with those saying jobs are "hard to get" rising to 30.5 percent while those claiming jobs are "plentiful" declined to 14.1 percent.

The Conference Board also said that the expectations Index declined to 41.0 in June from 47.3 in May, as those expecting business conditions to worsen over the next six months rose to 33.9 percent and those anticipating business conditions to improve decreased to 8.8 percent.

"Looking ahead, consumers' economic outlook is so bleak that the Expectations Index has reached a new all-time low," Franco said. "Perhaps the silver lining to this otherwise dismal report is that Consumer Confidence may be nearing a bottom."

The report also showed that the outlook for the labor market was also more pessimistic. Those expecting fewer jobs in the months ahead increased to 35.5 percent, while those anticipating more jobs declined to 8.0 percent.

Additionally, the Conference Board said that the proportion of consumers expecting their incomes to increase declined to 12.3 percent from 14.1 percent.

The bigger than expected drop in consumer confidence is likely to raise some concerns about the outlook for consumer spending, which makes up approximately two-thirds of economic activity.

Recent retail sales reports have indicated that consumers continue to spend in spite of deteriorating confidence, although the continued sales growth may be partly due to the tax rebate checks recently sent out by the government.

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