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US Consumer Confidence To Ease

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The closely-watched Conference Board’s consumer confidence index report will be released today. Unsurprisingly, the median estimates of economists polled forecast that consumer confidence will ease in the month of June.

Still, despite the forecast being pessimistic, it does show that the consumer confidence index still remains higher. The data comes as investors adjust their expectations on the US economy and monetary policy as a result.

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Estimates show that the consumer confidence index will slip to 132.0 in June, down from 134.1 in May. The consumer confidence index peaked to 137.9 in October last year. Since then, it has remained close to the October 2018 highs.

Consumer Confidence Index
CB Consumer Confidence Index – May 2019, 134.1

The CB’s consumer confidence index has increased steadily over the past two months since April 2019. It fell to 124.1 in March 2019.

Last week, the Fed’s dovish outlook suggested that there is a big chance it will cut rates. However, it is unlikely we will see that happen at least until September. Some corners of the markets expect a rate cut as early as July, which is also unlikely at this point.

Amid growth concerns on various themes including global trade and rising tensions between the US and Iran, consumer confidence is likely to take a small hit.

Even if the consumer confidence data does ease to the expected headline number, the markets will be unmoved by the data. This comes as the US consumer confidence is well anchored near the highs.

But questions remain on whether this optimism will remain in the months ahead. There are various headwinds both economically and geo-politically which could make consumers wary.

Consumer Confidence Index Recap – May 2019

In May, consumer confidence rose to 134.1. This was a beat on the estimates, and the index jumped by 4.9 points from 129.2 in April.

The CB’s present situation index which is based on the consumer’s assessment of the current business and labor market conditions jumped to 175.2, up from 169.0 in the previous month.

The expectations index which is a more short term assessment based on income, business and labor market conditions rose to 106.6 from 102.7 previously.

Most of the gains in May were driven by gains in employment. The data underlined consumer optimism as they expect growth to continue to rise in the short term. This was also evident from the CB’s present-day conditions.

Data for May saw the present day conditions rising to 38.3%, up from 37.6% a month ago.

There was also some optimism among consumers on job prospects. Consumers expected to find more jobs in the coming months.

This somewhat sits in contrast to the official unemployment data. Data from the Bureau of Labor Statistics in May saw the economy adding just 75,000 jobs in May. But at the same time, the unemployment rate held steady at 3.6%.

Downward revisions to previous month’s data saw the payrolls rising at an average pace of just 151,000 per month during the past three months. Wage growth also remained soft, rising 0.2% on the month, or about 3.1% on the year.

Will Rising Uncertainty Take Wind Off Consumer Optimism?

June’s CB consumer confidence index report will be interesting to watch. The survey covers a period following rising trade tensions between the US and China. However, the effects of higher tariffs are yet to trickle down to the average consumer.

Inflation remains tame in the US and despite the threat of higher tariffs, this has barely been able to budge consumer prices higher. The weak jobs report for May could, however, reshape the expectations.

Investors will be looking to the consumer confidence index report to assess the economic reports. There is a chance that there could be a lag in the data. With the markets widely expecting to see growth slow, the CB’s consumer confidence index report has been pointing otherwise.

Today’s report is not very likely to impact the markets much. But a dip in the index could potentially start to be a cause for concern.

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