US consumer confidence shows surprise gain

US consumer confidence improved in June, the Conference Board reported, surprising many analysts expecting a decline.

The consumer confidence index rose to 105.7 in June after 104.7 in May. Analysts on average had expected a reading of 103.9.

“The slight bounce-back in confidence this month was a result of the moderate improvement in consumers’ expectations,” said Lynn Franco, research director for the business research organization.

“Despite the uptick, consumers remain concerned about the short-term outlook.

Two other indexes in the report were mixed. The present situation index decreased to 132.7 from 134.1. The expectations index, however, edged up to 87.6 from 85.1 last month.

The second straight drop in the present situation index is likely “a signal that the economy is shifting into lower gear heading into the second half of this year.”

Economists monitor confidence as an indicator of future consumer spending habits. It is a key indicator for the economy since consumer spending represents about two-thirds of gross domestic product.

“The data is consistent with our view that, although the pace of consumption is slowing, consumers will continue to spend, contributing to GDP growth,” said Dawn Desjardins, senior economist at RBC Financial Group.

“The report signals that consumers are coping with the high level of gasoline prices and are optimistic about the future given the healthy state of the labor market and accelerating wage growth.”

The report showed consumers’ overall assessment of current conditions declined for the second consecutive month. Those claiming conditions are “good” fell to 26.8 percent from 28.5 percent. Those claiming conditions are “bad” eased to 14.9 percent from 15.2 percent.

Consumers saying jobs are “plentiful” decreased to 28.1 percent from 29.1 percent, while those claiming jobs are “hard to get” decreased to 19.9 percent from 20.2 percent.

Consumers’ outlook for the next six months improved slightly in June. Those expecting business conditions to worsen decreased to 11.8 percent from 12.9 percent. Those expecting business conditions to improve increased to 16.8 percent from 16.5 percent.

SOURCE: AFP