The Conference Board's Consumer Confidence Index was up in June, increasing by 8.8 points from the revised 93.1 in May. The June index of 101.9 reached its highest level in two years. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence gained across both portions of the Conference Board index. The Present Conditions index had the largest increase, up 14.3 points to 104.8 in June. This index measures how consumers perceive the current state of the economy.
The Expectations portion of the index, a measure of future economic activity, increased to 100.0 in June from 94.8 in May.
The University of Michigan's Consumer Sentiment Index, a comparable index, also jumped in June, rising to 95.6 from 90.2 in May. Each of the component indices improved. The Present Conditions index was 3.1 points higher in June at 106.7, while the Expectations portion increased to 88.5 from 81.6 in May.
Recent declines in gasoline and energy prices and improving labor markets are likely responsible for June's gains in consumer confidence. Other factors that support confidence are record household wealth as home prices continue to grow and relatively low interest rates pervade despite recent increases.
However, some factors continue to weigh on consumer confidence. Energy prices remain relatively high despite the recent declines. Consumers carry high debt burdens and wage growth has been slow. In addition, retail prices are increasing and consumers lack pent-up demand for spending.
Consumer confidence is expected to gradually rise over time as the labor market continues to strengthen and overall recovery continues, though continued fluctuations are likely. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence is a closely watched economic indicator.
Sources: www.conference-board.com
www.economy.com
