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U.S. consumer confidence plummets on job worries
By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — U.S. consumers are increasingly worried about jobs and the economy, the Conference Board said Tuesday, as it reported that its consumer confidence index plummeted to 52.9 in June — the lowest level since March — from a downwardly revised 62.7 in May.
“Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence,” said Lynn Franco, director of Conference Board’s consumer research center. “Until the pace of job growth picks up, consumer confidence is not likely to pick up.”
Earlier this month the government reported that nonfarm payrolls grew by a seasonally adjusted 431,000 in May, but most of the new jobs were temporary jobs at the U.S. Census, with very weak private-sector hiring. The government’s next payrolls report is due out Friday, with economists polled by MarketWatch looking for a June contraction of 130,000.
Economists had expected a June reading for consumer confidence of 62.8. The Conference Board’s prior reading for May was 63.3.
Consumers’ view on the present situation and their expectations deteriorated in June, with both reaching the lowest levels since March, according to the Conference Board. Their view on the present situation fell to 25.5 in June from 29.8 in May, while the expectations barometer declined to 71.2 from 84.6.
Respondents saying current business conditions are “good” fell to 8% in June from 9.7% in May, while those saying jobs are “hard to get” rose to 44.8% from 43.9%.
Respondents saying they expect business conditions to be worse in six months rose to 14.9% in June from 11.9% in May, while the percentage of those expecting better business conditions fell to 17.2% from 22.8%. Those expecting fewer jobs rose to 20.8% from 17.8%, while those expecting more jobs fell to 16% from 20.2%.
While the confidence report could fuel fears of a “double-dip” recession undercutting U.S. gross domestic product, analysts at RDQ Economics said such worries may be misplaced.
“Confidence has double-dipped in the last two recoveries (in early 1992 and early 2003) without the economy falling back into recession and the June pullback in confidence is far less severe than either of those two episodes,” according to an RDQ research note. “Furthermore, we think that the response to the oil leak in the Gulf of Mexico is depressing confidence.”
Meanwhile, analysts at Barclays Capital Research said the confidence report contains volatility, and they expect a positive overall trend in confidence as the job market expands in the new few months.
“Despite the drop in today’s report, the headline confidence index remains substantially higher than its recent trough,” according to a Barclays research note. “Furthermore, this survey is usually conducted near the time of the release of the payroll report and places more emphasis on household reaction to labor market conditions, which may explain some of the pessimism in June since the May rise in private payrolls disappointed expectations.”
Buying plans impacted
Consumers with plans to buy a home within six months fell to 1.9% in June – the lowest level since 1982 other than 1.7% in December, according to the Conference Board. In May 2.1% had plans to buy a home.
Those with plans to buy an automobile fell to a record low of 3.7% in June from 6% in May. The data go back to 1967.
Those with plans to buy major appliances fell to 22.9% in June from 26% in May.
“While the recession may have technically ended last summer, consumers remain skittish about job and income prospects and are refraining from consuming in a sufficient enough manner as to create substantial growth in GDP,” wrote Dan Greenhaus, chief economic strategist with Miller Tabak, in a research note.
Expectations for the 12-month inflation rate fell to 5.2% in June from 5.3% in May.