Economy Watch: Consumers A Little Less Optimistic

With several recent metrics pointing to sluggishness in the U.S. economy, it shouldn't come as a surprise that U.S. consumers are a little more weary about the future.
Credit: University of Michigan Surveys of Consumers
Credit: University of Michigan Surveys of Consumers

With a number of metrics pointing to a more sluggish economy (though not necessarily a recession), small wonder that U.S. consumers seem a little nervous about the future, at least according to the latest University of Michigan Consumer Sentiment Index. The overall index was down in June to 94.3, compared with 94.7 in May. The drop was small, but it reflects apprehension about the future—which could restrain consumer spending at retail properties.

Consumers were a bit less optimistic in June due to increased concerns about future economic prospects, according to the survey’s chief economist, Richard Curtin. The recent data highlighted the growing gap between the most favorable assessments of current economic conditions since July 2005, and the downward drift of the Expectations Index, which fell by 8.6 percent from a January 2015 peak.

Whatever strength recorded in early June was because of personal finances, while the weaknesses were in expectations for continued growth in the national economy. Consumers rated their current financial situation at the best levels since the 2007, largely due to wage gains. Prospects for gains in inflation-adjusted incomes in the year ahead were also the most favorable since the 2007 peak, enabled by record-low inflation expectations.

On the negative side, consumers don’t think the economy is as strong as it was last year, Curtin noted. Nor do they anticipate the economy will enjoy the same financial health in the year ahead as they anticipated a year ago.