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US Consumer Confidence Stumbles, the Future is Less Bright

Posted by Joseph Trevisani on Jul 28, 2015 12:07:00 PM

After feeling more optimistic than at any time in almost in eight years as recently as January, the confidence of American consumers slipped sharply in July as expectations for their immediate future plunged the most since August 2011.

Americans grew less sanguine about the prospects for the job market, their income, and the business economy even as their satisfaction with their current situation remained near the best in almost a decade. 

The Conference Board’s index of overall consumer confidence dropped to 90.91 in July from June’s 99.8, originally reported at 101.4. It was the poorest score in ten months. Economists in the Bloomberg survey had forecast a slight decline to 100. It was the biggest miss of the median forecast since February 2003. 

January’s reading of 103.8 was the highest since August 2007.

External factors from the gyrations in U.S. and foreign stock markets, the Greek debt crisis and the highly publicized equity crash in China may be adding to the basic economic fact that despite two years of steady job growth U.S. wage increases are barely beating inflation and are essentially stagnant since the end of the recession six years ago, noted the Conference Board.

“A less optimistic outlook for the labor market, and perhaps the uncertainty and volatility in financial markets prompted by the situation in Greece and China, appears to have shaken consumers’ confidence,” said Lynn Franco, the director of economic indicators at the Conference Board, in the accompanying statement.

The index of satisfaction for Americans with their current situation fell marginally to 107.39 in July from 110.28 but the index for the outlook in six months plummeted to 79.92 in from 92.75 in June.  It was the lowest score for the six month view since February 2014. 

The share of the U.S. population who said that jobs were plentiful dropped to 20.70 from 21.30 in June. The share of those saying jobs were hard to find to find climbed to 26.70 from 26.10. 

The percentage of American expecting jobs to be more plentiful in six months fell to 13.10 in July from 17.10. The percentage that expected jobs to be less plentiful rose to 20.00 from 15.20. 

The share of Americans who said current business conditions were good declined to 24.2 percent, the lowest since September, from 26.1 percent.

Business conditions were expected to worsen in six months by 10.70 percent in July up from 10.20.  Those anticipating better business conditions in half a year sank to 14.70 in July from 17.90. 

Income expectations also moved down. The share anticipating less income in six months rose to 11.20 in July from 10.60; those expecting better wages decreased to 17.00 from 17.60; those expecting the same income in six months was unchanged at 71.80.

Confidence moved lower in all three age categories, dropping the most in those under 35, second in folks over 55 and the least in people 35-54 years of age. 

Confidence was also skewed by income.  It fell for people making less than $25,000 a year, rose slightly for those earning $25,000-$35,000, dropped for those in the $35,000-50,000 bracket and gained for all higher categories except $100,000 to $125,000. 

Average hourly earnings at private employers were little changed in June. They increased just 2.0 percent over the year and have averaged the same since the end of the recession in June 2009.

Inflation has also been stable. In June the consumer price index had gained 0.1 percent over 12 months, and had averaged 0.7 percent for the past year. Since the recession it has averaged 1.6 percent annually. The core figures were 0.2 percent in June and 1.8 percent on the year with a 1.7 percent annual average since June 2009. 

The Federal Reserve’s chosen inflation gauge, the core PCE rate has averaged 1.4 percent annually since the middle of 2009. 

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

cc july 28

cc present july 28

cc expec july 28

 

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