Worries about inflation and a potential recession dragged down consumer confidence to the lowest level in 16 months, the Conference Board’s widely followed survey showed Tuesday.
The Conference Board’s index of consumer confidence fell to 98.7 in June, below the 101.0 reading expected by economists. The prior month’s reading was revised down to 103.2 from the initial estimate of 106.4, indicating that consumers were already feeling less optimistic about the economy than thought.
The barometer of consumer expectations—based on consumers’ short-term outlook for income, business, and labor market conditions—plunged in June, falling to 66.4 from 73.7. It is now at its lowest level since 2013.
The gauge of the present situation—based on consumers’ assessment of current business and labor market conditions—slipped to 147.1 from 147.4 last month.
“Consumer confidence fell for a second consecutive month in June,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “While the Present Situation Index was relatively unchanged, the Expectations Index continued its recent downward trajectory—falling to its lowest point in nearly a decade. Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by yearend.”
High prices are forcing people to reassess vacation plans even while purchasing intentions for big ticket items remained steady, according to the survey.
“Purchasing intentions for cars, homes, and major appliances held relatively steady—but intentions have cooled since the start of the year and this trend is likely to continue as the Fed aggressively raises interest rates to tame inflation. Meanwhile, vacation plans softened further as rising prices took their toll. Looking ahead over the next six months, consumer spending and economic growth are likely to continue facing strong headwinds from further inflation and rate hikes,” Franco said.
Other surveys, including the University of Michigan’s survey of consumer sentiment, have found that consumers consider now a terrible time to make big purchases. Fear of prices going even higher, however, may be encouraging some households to make purchases in advance.