WASHINGTON – U.S. consumer confidence slipped to its lowest level in 16 months as persistent inflation and rising interest rates have Americans as pessimistic as they've been about the future in almost a decade.
The Conference Board said Tuesday that its consumer confidence index slipped to 98.7 in June from 103.2 in May, the second straight monthly decline and the lowest level since February 2021.
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The business research group’s expectations index, based on consumers’ six-month outlook for income, business and labor market conditions, tumbled in June to 66.4 — its lowest level since 2013 — from 73.7 in May. It has been a consistently weak spot in the survey recently.
“Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices,” said Lynn Franco, the Conference Board’s senior director of economic indicators. “Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year end.”
The present situation index, which measures consumers’ assessment of current business and labor conditions, ticked down less than a full point in June to 147.1.
Inflation has soared over the past year at its fastest pace in more than 40 years, with rising costs for nearly everything negating Americans’ pay raises.
Consumer prices surged 8.6% in May from a year earlier, faster than April’s year-over-year increase of 8.3%, the Labor Department reported earlier this month. The new inflation figure was the highest since 1981 and came after the Federal Reserve raised its main borrowing rate by a half point in early May in its effort to tamp down rising inflation.
The Labor Department's producer price index — which measures inflation before it reaches consumers — also surged 10.8% in May from a year earlier, putting pressure on the Federal Reserve to become even more aggressive in its fight against historic inflation.
The Fed responded a couple of weeks ago by raising its main borrowing rate by three-quarters of a point, its biggest increase since 1994. More rate hikes are expected this year.
The Conference Board's survey showed that consumers grew more pessimistic about short-term business conditions, the job market and their own short-term financial prospects.
Purchasing intentions for big-ticket items -- cars, homes and major appliances -- remained relatively stable, but rising costs for travel have forced Americans to dial back some vacation plans.