Economy

Big Uptick in Consumer Confidence For June, But Cutoff Date Was Pre-Brexit Reaction

Jon C. Ogg

Tuesday’s economic readings already showed a better than expected GDP revision for the first quarter and a gain in the S&P Case-Shiller Home Price Index. Now the Conference Board is out with a better than expected reading in Consumer Confidence. June’s reading was all the way up at 98.0.

What matters here on the surface is that the Bloomberg consensus estimate was only 93.3, and its Econoday range was listed as 90.8 to 95.5. Reuters was calling for a reading of 93.3 in June. May’s Confidence index was revised to 92.4 from 92.6 initially reported.

Before investors and economic watchers get all excited here, there is some serious consideration that needs to be made. When the data were collected from questionnaires, the Brexit outcome had not come down the pipe yet for the huge drop. It was also expected that the Brexit vote was going to be a “stay” and pass without much chaos. The Conference Board and Nielsen showed that the cutoff date for the preliminary results was June 16 — almost a full week before the bad news on the Brexit front sent markets reeling.

Tuesday’s report showed that the Present Situation Index increased from 113.2 in May to 118.3 in June, while the Expectations Index rose from 78.5 in May to 84.5 in June.

Consumers’ appraisal of current conditions improved in June, and their optimism regarding the short-term outlook improved in June. Consumers’ outlook for the labor market was more favorable than last month, but the net assessment of the labor market was mixed. Sub-index readings and data were shown as follows:

  • Those stating business conditions are “good” increased slightly from 26.1 percent to 26.9 percent.
  • Those saying business conditions are “bad” decreased from 21.4 percent to 17.7 percent.
  • Those claiming jobs are “plentiful” declined from 24.5 percent to 23.4 percent.
  • Those claiming jobs are “hard to get” also decreased from 24.5 percent to 23.3 percent.
  • Those expecting business conditions to improve over the next six months increased from 15.0 percent to 16.8 percent.
  • Those expecting business conditions to worsen decreased slightly, from 11.7 percent to 11.4 percent.
  • The percentage anticipating more jobs in the months ahead increased from 12.5 percent to 14.2 percent.
  • Those anticipating fewer jobs decreased marginally from 18.2 percent to 17.9 percent.
  • The proportion of consumers expecting their incomes to increase improved from 16.5 percent to 18.2 percent.
  • The proportion expecting a reduction in income edged down from 12.6 percent to 11.5 percent.

Lynn Franco, Director of Economic Indicators at The Conference Board, said of June’s report:

Consumer confidence rebounded in June, after declining in May. Consumers were less negative about current business and labor market conditions, but only moderately more positive, suggesting no deterioration in economic conditions, but no strengthening either. Expectations regarding business and labor market conditions, as well as personal income prospects, improved moderately. Overall, consumers remain cautiously optimistic about economic growth in the short-term.

Again, this is a great reading on the surface. It is just unfortunate that the more recent news after the report’s cutoff date will likely have diminished that exuberance in July’s reading.