Research >> Economics
University of Michigan Consumer Confidence Edges Higher
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Consumer confidence posted its fifth consecutive monthly improvement in June, rising a total of 28% since its November low. “Consumers have become convinced that the steepest economic declines are now over, but very few consumers anticipate a quick end to the recession,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. The personal financial situation of consumers remained dismal in the June survey. “The majority of consumers reported that their financial situation had recently worsened, with income declines reported three times as frequently as income gains,” noted Curtin. Consumers have stressed their intent to rebuild their savings and to reduce their debts. Although consumer spending will improve during the balance of 2009, total personal consumption expenditures will post an anemic increase of 1.6% during 2010.
The Index of Consumer Sentiment was 70.8 in the June 2009 survey, up from 68.7 in May, and well above the 56.4 recorded last June—the third positive year-to-year change since mid 2007. The Sentiment Index has now regained 15.5 points out of its total loss of 41.6 points from its January 2007 of 96.9. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 69.2 in June, barely changed from the 69.4 in May but well above the 49.2 recorded last June. The entire increase in overall confidence was due to a rise in Current Economic Conditions Index to 73.2 in June up from 67.7 in May and 67.6 last June. The economic news heard by consumers was less negative but still quite bleak: negative developments were reported three times as frequently as positive news in June, but this represented a vast improvement from six months ago when consumers reported hearing ten times more negative than positive economic news. The majority of consumers still expect the economy to be mired in unfavorable financial conditions in the year ahead, if not longer.
Consumers continued to report a heightened level of financial distress. The majority of families reported that their financial situation had recently worsened in June due to income declines, shorter work hours, and lost jobs. Two-thirds of all families expected their finances to remain in the same dismal state or further worsen in the year ahead. Just 12% of consumers anticipated that their inflation adjusted income would increase. “Since the start of 2009, the size of income gains expected by consumers has been the smallest ever recorded in the history of the surveys—averaging less than one-half of one percent,” Curtin explained.
Posted: June 26, 2009 Friday 10:00 AM