*The U.S. Conference Board Consumer Confidence Index increased by 12.2pts to 98.1 in June, the largest monthly increase since November 2011, but it has only reversed one-fourth of its recent decline, placing it 34.5pts below February’s level (Chart 1). Still, June’s sizable increase is encouraging, given that consumer confidence will shape the recovery in consumption. The cut-off date for this survey was June 18, so it does not capture the recent COVID-19 incidence spikes in several large southern and western states that could derail this momentum (Chart of the week - U.S.: COVID-19 spike in south & west to temper recovery, June 26, 2020)

 

*Consumers upgraded assessments of present conditions in June (+17.8pts to 86.2) after a historic downgrade in April (-93.7pts to 73.0), and unsurprisingly, they continued to assess future conditions more favorably ‑- the expectations index increased by 8.4pts to 106, placing it within the upper end of observations over the last 20 years (Chart 2). 

 

*Consumers are slightly more optimistic about current business conditions and labor markets, a relatively elevated share, 42.3%, expect stock prices to increase within the next 12 months, and they expect a significant increase in the rate of inflation over the next 12 months (6.7% compared to ~4.6% pre-COVID-19 pandemic). See Chart 3.

 

Households’ assessments of the labor market continued to improve slightly in June. The share of consumers characterizing jobs as “plentiful” ticked up to 20.8% from 16.5% and 23.8% of consumers said jobs were “hard to get” (down from 29.2% in May), but a majority of consumers, 55.4%, continued to describe jobs as “not so plentiful” (Chart 4). The less pessimistic assessments of labor markets indicate that the unemployment rate likely declined for the second consecutive month in June, but remained historically high (Chart 5).

 

The share of consumers expecting incomes to increase over the next six months remained very low at 15.1%, highlighting the need for continued financial support from the government (Chart 6).

 

Despite the gloomy expectations for incomes, the shares of consumers planning to buy autos (June: 11.7%, April: 8.1%) and homes (June: 6.5%, April: 5.3%) in the next six months continued to rise from April’s lows, consistent with the quick rebounds in spending on motor vehicles and parts, new home sales, and mortgage applications for home purchases. However, the share of households planning to buy major appliances ticked down to 45.5% from 46.5%, a 5.5-year low.

 

Confidence in medical systems and treatments, states’ abilities to slow the transmission of COVID-19, and outlook for the economy and labor market are critical for a sustained recovery until there is a vaccine for COVID-19.

 

Chart 1:

 

Chart 2:

 

Chart 3:

 

Chart 4:

 

Chart 5:

 

Chart 6:

 

Roiana Reid, roiana.reid@berenberg-us.com

Member FINRA & SIPC

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