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June 28, 2019

Economy Watch: Consumer Confidence Declines in June

Still, confidence levels remain strong enough to suggest economic expansion will continue, an economist said.

By  Christopher Ruvo

Escalating trade tensions with China and the threat of more tariffs on goods imported from that country dampened the spirits of U.S. consumers in June, with two closely-watched national indices on consumer sentiment experiencing monthly declines.

Consumer spending accounts for about 70% of gross domestic product. Sentiment can provide an important indicator of the relative current and future health of the American economy – something of importance for the promotional products industry.

On Friday, the University of Michigan reported that its Index of Consumer Sentiment declined 1.8% from May to 98.2 in June – a reading that, in year-over-year terms, was nonetheless even with June 2018. “Most of the June slippage was concentrated in prospects for the national economy, with the unemployment rate expected to inch upward instead of drifting downward in the year ahead,” said Richard Curtin, chief economist on the survey.

Similarly, the Conference Board’s Consumer Confidence Index declined from 131.3 in May to 121.5 in June. “The escalation in trade and tariff tensions (in June) appears to have shaken consumers’ confidence,” said Lynn Franco, senior director of economic indicators at The Conference Board. “Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers’ confidence in the expansion.” 

Despite the downbeat notes, there were bright spots. Both Franco and Curtin noted that their index readings still indicate strong levels of consumer confidence. Curtin also pointed out that the U.S economy is about to set a new record for consistent expansion. The economy has been expanding since June 2009 and has now matched the previous ten-year long record expansion seen between March 1991 and March 2001.

“While more negative trade news will act to decrease consumer spending, the persistent overall strength in consumer confidence is still consistent with growth of real personal consumption expenditures by 2.5% during the next 12 months,” Curtin said.