Oops, it dropped. Everyone run for the hills.
The Conference Board Consumer Confidence Index™, which had improved considerably in May, retreated in June.
The Index now stands at 49.3 (1985=100), down from 54.8 in May. The Present Situation Index decreased to 24.8 from 29.7.
The Expectations Index declined to 65.5 from 71.5 in May.
The job outlook was also more pessimistic. Those anticipating more jobs in the months ahead decreased to 17.4 percent from 19.3 percent, while those anticipating fewer jobs increased to 27.3 percent from 25.6 percent. The proportion of consumers expecting an increase in their incomes declined to 9.8 percent from 10.8 percent.
Once again the focus is on what is perceived instead of what is.
How the Data Is Used
Manufacturers, retailers, banks and the government monitor changes in the CCI in order to factor in the data in their decision-making processes.
While index changes of less than 5% are often dismissed as inconsequential, moves of 5% or more often indicate a change in the direction of the economy.
A month-on-month decreasing trend suggests consumers have a negative outlook on their ability to secure and retain good jobs. Thus, manufacturers may expect consumers to avoid retail purchases, particularly large-ticket items that require financing.
Manufacturers may pare down inventories to reduce overhead and/or delay investing in new projects and facilities. Likewise, banks can anticipate a decrease in lending activity, mortgage applications and credit card use.
When faced with a down-trending index, the government has a variety of options, such as issuing a tax rebate or taking other fiscal or monetary action to stimulate the economy.
Conversely, a rising trend in consumer confidence indicates improvements in consumer buying patterns. Manufacturers can increase production and hiring. Banks can expect increased demand for credit. Builders can prepare for a rise in home construction and government can anticipate improved tax revenues based on the increase in consumer spending.
This implies perception is dictating policy, so one has to wonder in this a chicken-egg issue? Is it the policy adjustments which can lead to more malaise or the perception?