Summary: Conference Board Consumer Confidence Index deteriorates again in June, lower than consensus expectations; views of present conditions, short-term outlook deteriorate; Expectations Index falls to lowest point in decade; weaker growth expected in second half, “growing risk of recession”.
US consumer confidence clawed its way back to neutral over the five years after the GFC in 2008/2009 and then went from strength to strength until late 2018. Measures of consumer confidence then oscillated within a relatively narrow band at historically high levels until they plunged in early 2020. Subsequent readings then fluctuated around the long-term average until March 2021 when they reached elevated levels. However, a noticeable gap has since opened between the two most-widely followed surveys.
The latest Conference Board survey held during the first three weeks of June indicated US consumer confidence has deteriorated again. June’s Consumer Confidence Index registered 98.7 on a preliminary basis, lower than the median consensus figure of 100.0 as well as May’s final figure of 103.2.
Consumers’ views of present conditions and the near future both deteriorated. The Present Situation Index slipped from May’s revised figure of 147.4 to 147.1 while the Expectations Index dropped from a revised figure of 73.7 to 66.4.
“While the Present Situation Index was relatively unchanged, the Expectations Index continued its recent downward trajectory, falling to its lowest point in nearly a decade,” said Lynn Franco, a senior director at The Conference Board. He attributed the “grimmer outlook” to rising fuel and food prices were the main concerns of consumers.
US Treasury yields moved lower on the day. By the close of business, 2-year and 10-year Treasury bond yields had both lost 2bps to 3.11% and 3.18% respectively while the 30-year yield finished 3bps lower at 3.28%.
In terms of US Fed policy, expectations for a higher federal funds rate over the next 12 months softened slightly. At the close of business, July contracts implied an effective federal funds rate of 1.68%, 10bps higher than the current spot rate while September contracts implied a rate of 2.45%. June 2023 futures contracts implied 3.535%, 195bps above the spot rate.
Franco pointed out the latest reading of the Expectations Index suggests “weaker growth in the second half of 2022 as well as growing risk of recession by year-end.”
The Consumer Confidence Survey is one of two widely followed monthly US consumer sentiment surveys which produce sentiment indices. The Conference Board’s index is based on perceptions of current business and employment conditions, as well as respondents’ expectations of conditions six months in the future. The other survey, conducted by the University of Michigan, is similar and it is used to produce an Index of Consumer Sentiment. That survey differs in that it does not ask respondents explicitly about their views of the labour market and it also includes some longer-term questions.
