US June Confidence Up: Covid Rebound Could Hit July

The Conference Board’s US consumer confidence index rose solidly to a reading of 98.1 in June from a downward revised 85.9 reading in May, but a resurgence of Covid-19 cases at the end of the month and the dwindling effects of the stimulus payments suggest another increase in July is not a guarantee.

Analysts had expected the June index to rise to 90.0 from the originally reported 86.6 reading in May. The index was at 132.6 in February before the state shutdowns began. The reading of present situation reading jumped from 86.2 from 68.4, while the expectations reading rose to 106.0 from 97.6.

Lynn Franco, the Conference Board’s Senior Director of Economic Indicators, said “(t)he re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions, but the Present Situation Index suggests that economic conditions remain weak.”

Franco noted that the improvement in expectations suggest less pessimism, but not necessarily significant pickup. “Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels,” she said.

The assessments of current business and employment conditions both improved in June. The percentage of respondents describing current business conditions as “good” rose to 17.4% from 16.4% in May, while those reporting they were “bad” fell to 43.2% from 51.2%.

Those reporting jobs as “plentiful” rose to 20.8% from 16.5%, while those reporting that they are “hard to get” fell to 23.8% from 29.2%. As a result, the gap between the two jobs measures, a closely watched indicator of employment conditions, narrowed to -3.0 in June from -12.7 in May. By comparison, the gap stood at +28.2 a year ago.

Respondents looking for business conditions to improve over the next six months ticked up to 42.6% from 42.5%, compared with 15.3% who expect conditions to worsen. Those expecting more jobs in the coming months fell to 38.4% from 39.5% in May, while those looking for fewer jobs fell more sharply to 14.2% from 19.9%. Those looking for the same number of jobs rose to 47.4% from 40.6%.

In other data released on Tuesday, the Chicago PMI moved up slightly in June, but remained well below the breakeven point.

Taken together, the regional data released in June suggest improvement in the national ISM index released on Wednesday. Some analysts expect the index could rebound back above 50.0 for the first time since the pandemic shutdowns began, but the mixed regional data do not guarantee that outcome.

The Dallas Fed services data released earlier on Tuesday moved back above zero, the breakeven point for this report, but an increase in Covid-19 cases in Texas could mean a reversal in July.

As with the manufacturing sector, the regional services readings were mixed, so it is not certain that the ISM non-manufacturing reading will move from contraction to expansion when it is released on July 6.

Colin Lambert

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