The final University of Michigan Consumer Sentiment Index for June fell month over month from a May reading of 100.0 to June’s level of 98.2. Economists polled by Bloomberg were expecting a final June reading of 97.9.
When the preliminary June index score was reported earlier this month, the index had dipped to 97.9 from the final May reading. Part of the drop in the mid-month reading was due to concerns over threatened tariffs on goods imported from Mexico, and a larger part was due to threatened 25% tariffs on Chinese imports.
The survey’s chief economist, Richard Curtin, commented, “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.”
The month-over-month decline was entirely due to high-income households worried about the negative impact of tariffs, but falling mortgage interest rates and continuing strength in consumer confidence foreshadow rising personal spending over the next 12 months. Compared with June of 2018, the overall sentiment index was unchanged.
Curtin also noted the country’s long economic expansion, “The U.S. expansion is on the verge of setting a new record. The ten-year expansion from June 2009 to June 2019 has now tied the prior record from March 1991 to March 2001. Next month it will become the longest expansion since the mid-1850s.”
The month-over-month consumer expectations subindex fell by 4.5% from 93.5 to 89.3, and the current conditions subindex increased from 110.0 to 111.9 (1.7%).
Year over year, the current conditions subindex dropped by 3.9% and the consumer expectations subindex rose by 3.5%.
Commenting on the month-over-month disparity between the two subindexes, Curtin said, “Since it is the Expectations Index, rather than the Current Conditions Index, that is most closely tied to changes in discretionary purchases, it should be no surprise that the annual growth rate in real personal consumption was 2.6% in the past two years, half the 5.2% average from 1998 to 2000.”