Consumer confidence rebounds in June after two months of declines

Consumer confidence bounced back to hit an eight-month high in June despite the recent sharp slowdown in job growth.

After two straight months of dips, the Conference Board Consumer Confidence Index jumped from a revised 92.4 in May to 98.0 in June. The survey period ended on June 16, before the United Kingdom’s vote to leave the European Union and the ensuing turbulence in financial markets.

Consumers’ appraisal of present business and employment conditions, as well as their expectations for the next six months, improved slightly from May.

A smaller share of those surveyed said business conditions were bad in June — 17.7%, down from 21.4% the previous month. And  nearly 27% said conditions were good, up from 26.1%. The portion expecting better business conditions the next six months increased to 16.8% from 15%.

Meanwhile, consumers’ perception of the labor market isn’t as dire as May’s job report indicates. The portion expecting more jobs in the next six months rose from 12.5% in May to 14.2%; the share expecting fewer jobs decreased from 18.2% to 17.9%.

However, Americans are more cautious of today's overall job landscape, with 23.4% saying jobs are plentiful, down from 24.5% in May. But fewer also say jobs are hard to get. The government said the economy added just 38,000 jobs in May.

“Labor market perceptions are not corroborating any sudden weakening in the labor market; neither are jobless claims,” says Jim O'Sullivan, chief U.S. economist of High Frequency Economics.

Meanwhile, the 4.7% unemployment rate is increasing wage pressures, with 18.2% of consumers expecting their incomes to rise in the next six months, up from 16.5% in the previous survey.

The bump In confidence should support continued strong spending by consumers.

“It looks like real consumption growth accelerated to at least 3.5% annualized in the second quarter, and the resilience of confidence supports our view that spending will continue to grow at close to 3% over the rest of the year,” says economist Andrew Hunter of Capital Economics.