The Conference Board’s measure of consumer confidence fell sharply in June to 121.5, falling well short of economists’ expectations and reflecting a considerable decline from the preceding month.
From a broad perspective, the index remains elevated, consistent with a generally upbeat consumer sector. Still, the direction and magnitude of the recent decline is noteworthy.
Survey respondents acknowledged a dimmer view for both broad business and labor market conditions, reflecting the negative drumbeat of news on the trade front in recent months and the disappointing May jobs report. The result was a less enthusiastic endorsement of current economic conditions, but an even more pessimistic outlook on the future.
On a positive note, unemployment remains exceptionally low and layoffs have shown no signs of a meaningful pickup. Still, the marked slowdown in the pace of job creation since the beginning of the year reflects the softening in the pace of growth, and could be a precursor to rising layoffs should conditions continue to deteriorate. That potential risk hasn’t been lost on consumers.
Although the decline in the collective consumer mood is unquestionably negative, the absolute level remains unambiguously positive. Business conditions may have faltered and risks have increased, but most data still points to an economy that is not at near-term risk of contracting.
The good news is that the primary source of angst appears to be linked to trade policy and could be alleviated with a breakthrough there. The bad news? It’s not clear what appetite or sense of urgency exists on either side to strike a deal in the near term. The result is a significant cloud that hangs over sentiment, with the potential for that to worsen if negotiators for the U.S. and China are unable to break the logjam and both sides dig in for a protracted conflict.
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