The Conference Board’s Consumer Confidence Index fell again in June, the second and seventh consecutive decline in the last twelve months. The composite index fell 4.5 points, or 4.4 percent, to 98.7, the lowest level since February 2021 (see first chart). The index is down 23.4 percent from a year ago. The fall was centered on consumer expectations for the future.
The expectation component sank 7.3 points, or 9.9 percent, at 66.4 (see middle of the first chart) while the current-situation component – one of AIER’s fairly coincidental indicators – fell just 0.3 point to 147.1 (see below the first chart). The expectation index is down 38.8 percent from a year ago and is at its lowest level since March 2013. The index is below readings just before the last three of the last four recessions began.
In the expectation index, all three components decreased in May vs. The High Income Expectations Index fell 2.0 points to 15.9 while the Low Income Expectations Index rose 0.7 points, leaving the Net (Expected High Income – Expected Low Income) down 2.7 points at 0.7.
The expectation index for good business conditions stood at 1.7 points lower at 14.7 while the index for expected bad conditions rose 3.1 points, with the net (expected business conditions good – expected business conditions bad) down 4.8 points to -14.8.
The job market outlook weakened in June as expectations for a further job index fell 1.2 points to 16.3, while expectations for a lower job index rose 2.5 points to 22.0, while the net fell 3.7 points to -5.7.
For the elements of the current state indicator, the current state of business and the state of employment have weakened slightly. Net reading for current business conditions (current business conditions are good – current business conditions are bad) was -3.4 in June, down from -1.9 in May. The current outlook for the labor market saw the hard-to-find job index fall 0.8 points to 11.6 as the massive job index fell 0.6 points to a still-strong 51.3 leading to a 0.2-point increase in the net at 39.7. A net above 40 is considered strong by historical comparison.
Inflation expectations rose to 8.0 percent in June, a record high; Expectations for January 2020 were 4.4 percent (see second chart). The sharp rise in inflation expected from the Conference Board survey is consistent with the results of the University of Michigan survey, although the levels are different (see Chart 2). Inflation expectations remain extremely high as prices of many goods and services continue to rise at high speeds. The extreme outlook for inflation is the main driver of weak expectations among consumers.
Rising prices for many consumer goods and services are mainly due to material shortages, a tight labor market and logistical problems that prevent supply from meeting post-recession demand, although significant progress has been made in increasing production. . Russia’s aggression in Ukraine and periodic lockdowns in China have exacerbated price pressures due to rising energy prices. Moreover, the Fed’s tightening cycle increases the risk of policy errors and adds extreme levels of risk and uncertainty to the overall economic outlook.