Consumer confidence rises to better-than-expected level in June
The business research group said its Consumer Confidence Index rose 2.7 points to 105.8 this month from a revised 103.1 in May, better than the 104.0 analysts expected. In May, the index shot up more than five points after dropping in April.
June’s reading was the highest since June 2002, when the index stood at 106.3.Consumer sentiment has been choppy over the past year, reflecting uncertainty in the economy.
“The improvement in consumer’s mood suggests that business activity and labor market activity will continue to pick up over the next several months,” said Lynn Franco, director of The Conference Board’s Consumer Research Center, in a statement. “And, with consumers in better spirits, and job concerns remaining relatively steady, there is little reason to expect a dramatic shift in consumers’ spending.”
However, Franco said June’s confidence levels may be hard to sustain given that oil prices, which rose steadily during the month, surpassed $60 a barrel for the first time in recent days.
“This could take a bite out of consumer confidence,” Franco said, though she acknowledged that consumers so far have been able to weather oil price volatility well.
Mark Vitner, senior economist at Wachovia Corp. in Charlotte, N.C., agreed that the runup in oil prices could cause confidence to slip. But he said he’s not worried as long as sentiment stays around the 90 to 105 level, consistent with moderate economic growth.
Vitner added that the uptick in confidence offers reason to be optimistic about the Labor Department’s June job report, to be released July 8. Analysts expect nonfarm payrolls to add 180,000 jobs in June, compared to a 78,000 increase the prior month. The unemployment rate is expected to remain at 5.1 percent.
Economists and Wall Street closely track consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity. The Dow Jones industrial average, which was also lifted by a drop in oil prices, was up 110.02, or 1.07 percent, at 10,400.80 shortly before the close of trading.
One component of the consumer confidence report, which looks at consumers’ view of the current economic situation, rose to 120.7 from 117.8. Another component, the Expectations Index, which measures consumers’ outlook over the next six months, rose to 95.8, from 93.4.
The Conference Board’s gauges are derived from responses received through June 21 to a survey mailed to 5,000 househoods in a consumer research panel. The figures released Tuesday include responses from at least 2,500 households.
The number of respondents describing business conditions as “bad” edged down to 15.5 percent in June from 16.4 percent. The number of consumers calling conditions “good” was virtually unchanged at 26.9 percent.
Consumers’ feelings about employment also showed signs of improvement. The number of consumers saying jobs are “hard to get” fell to 22.6 percent from 24.1 percent, but those calling jobs “plentiful” was virtually unchanged at 22.6 percent. For the first time in nearly three years, the percentage of consumers noting that jobs are “hard to get” did not exceed the percentage saying jobs are “plentiful.”
The number of those expecting business conditions to worsen eased to 9.0 percent from 9.5 percent. The number of consumers expecting business conditions to improve was virtually unchanged at 19.2 percent.
The outlook for the labor market, however, was unchanged from May. The number of respondents anticipating more jobs would become available in the coming months remained at 15.2 percent, while the number of those expecting fewer jobs edged up to 16.5 percent. The number of consumers expecting their incomes to increase in the months ahead jumped to 19.4 percent from 17.8 percent last month.
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