June Consumer Confidence

Updated 30-Jun-09 10:31 ET

Highlights

The Consumer Confidence report for June from the Conference Board checked in at 49.3% versus 54.8% in the prior month and the consensus estimate of 55.3%.
The disappointing read was driven by a drop in both the Present Situation Index (to 24.8% from 29.7%) and the Expectations Index (to 65.5% from 71.5%).
The expectation that business conditions would improve over the next six months dropped to 21.2% from 22.5% while the belief they would worsen increased to 20.2% from 18.0%.
The job outlook was also more pessimistic, according to the Conference Board, as those anticipating more jobs in the months ahead fell to 17.4% from 19.3%.
Fewer consumers are expecting an increase in their income, as evidenced by a drop in that measure to 9.8% from 10.8%.

The determination by the Conference Board is that the decline in the Present Situation Index continues to imply that economic conditions are still weak, though not as week as earlier this year. Additionally, the level of the Expectations Index suggests "less negative conditions in the months ahead, as opposed to strong growth."
This isn't the report the market was hoping for since it conveys a lingering sense of anxiety about recovery prospects.
Although income gains are the main driver of spending, a dip in confidence isn't going to help the market's perspective on the consumer spending outlook, especially when juxtaposed with the understanding that the personal savings rate hit a 15-year high of 6.9% in May.

Consumer sentiment indices get way too much attention. The simple fact is that sentiment does not correlate strongly with consumer spending and thus has little predictive value. Consumer spending correlates more closely with income. Sentiment tends to reflect well known factors such as unemployment rates and gas prices more than it predicts future spending patterns.

Category	JUN	MAY	APR	MAR	FEB
Conference Board	49.3	54.8	40.8	26.9	25.3
Expectations	65.5	71.5	51.0	30.2	27.3
Present Situation	24.8	29.7	25.5	21.9	22.3
Employment ('plentiful' less 'hard to get')	-40.3	-38.1	-41.7	-44.1	-42.3
1 yr inflation expectations	5.9%	5.6%	5.9%	5.8%	5.9%