US consumers became more optimistic in the May/June period as employment prospects picked up. The US Conference Board survey revealed a sharp rise in its consumer confidence index to 98, which is well up on the May reading of 92.4 and back above the pre-2008 average. The result was considerably higher than the median expectation of 93.7, although the survey period does not include the week of the UK’s EU vote and next month’s reading is likely to be affected. The higher figures were released on the same day as final revisions were made to US first quarter GDP numbers which showed the US economy grew more than previously thought.
Lynn Franco, Director of Economic Indicators at the Conference Board said, “Expectations regarding business and labor (sic) market conditions, as well as personal income prospects, improved moderately. Overall, consumers remain cautiously optimistic about economic growth in the short-term.”
How confident consumers feel about the stability and durability of their finances affects their spending and saving patterns. Consumer confidence surveys are therefore viewed as one of the key leading indicators of an economy’s growth rate, especially for Western countries where an estimated 60-70% of economic activity, or GDP, is in the form of private sector consumption.