Though consumers are seemingly more confident about the economy and the future, they are not translating that confidence into retail sales, according to the Conference Board’s Consumer Confidence Index and the U.S. Commerce Department.
Overall retail sales slipped 1.1 percent—the largest decline in 16 months and a sharp departure from the 1.6 percent increase that retailers saw in May. The slide signals that the economy’s growth spurt may be cooling in light of rising interest rates and significantly higher prices for items like food and gas.
“Though consumers held off as long as possible, higher gas prices seemed to affect some spending in June,” said National Retail Federation President and CEO Tracy Mullin. “Regardless of wages, Americans only have a certain amount of disposable income each month. When they are forced to spend unallocated dollars on gasoline, they are unable to spend their money on other merchandise.”
The slide in sales reinforces analysts forecast for a softer second quarter. Consumer spending is forecast to slow to a 3.2 percent annual rate in the second quarter from a 3.8 percent pace in the prior three months, based on the a Bloomberg poll. Looking to a brighter second half, third-quarter spending is expected to rise 3.5 percent rate, the survey found, as hiring and incomes rebound.
Despite the drop in sales, confidence increased sharply in June. The Consumer Conficence Index now stands at 101.9 (1985=100), up from 93.1 in May. The Present Situation Index is now 104.8, up from 90.5 in May. The Expectations Index rose to 100.0 from 94.8.
Consumers’ assessment of current conditions improved considerably in June. Those saying business conditions are good rose to 25.6%, up from 22.2%. Those claiming conditions have worsened fell to 17.5% from 21.6%. Consumers claiming jobs are “hard to get” decreased to 26.5% from 30.3%. Those saying jobs are “plentiful” rose to 18.0 percent from 16.6 percent.
Consumers are also more optimistic about the short-term future. Those expecting business conditions to improve in the next six months rose to 23.4% from 22.8%.
The employment outlook remains upbeat. Those anticipating more jobs to become available increased to 19.7% from 18.7%. Those expecting fewer jobs edged down to 17.1% from 17.3%. The proportion of consumers anticipating an increase in their incomes rose to 19.3%, 17.1% last month.