US Consumer Confidence Falls in June on Pessimistic Jobs Outlook

The Conference Board’s measure of U.S. consumer confidence more than unwound May’s surge, falling to 52.9 in June from the prior month’s 62.7 (revised from 63.3). Market expectations were for a slight easing in the index to 62.5. The labour market differential (those saying jobs are “plentiful” minus respondents saying jobs are “hard to get”) deteriorated to -40.5 from the prior month’s -39.3 reading (revised from -39.0 previously), its lowest reading since March. This result may reflect the disappointing private employment numbers in May that followed the surge seen in April.

The decline in consumer confidence in June from the previous month reflected weakness in both components. The “present situation” measure fell to 25.5 from 29.8 in May, while the “expectations” component plunged to 71.2 from 84.6. These readings represent the lowest index levels since March.

The outlook for employment deteriorated in both the “present situation” and “expectations” components. For the former, the “jobs hard to get” index rose to 44.8 from the 43.9 seen in May while the “jobs plentiful” index fell to 4.3 from 4.6, pushing the employment differential up to -40.5 from the previous month’s –39.3. The “expectations” component saw the “more jobs” index fall to 16.0 from 20.2 in May, with the “fewer jobs” index rising to 20.8 from 17.8.

The fall in consumer confidence in June reflects heightened concerns related to the outlook for labour market and the economy in general. This deterioration in consumer attitudes follows downward revisions to consumer spending and economic growth in the first quarter of 2010, and suggests that consumer spending could be constrained unless the labour markets see further improvements. The elevated unemployment and the mounting concerns that the housing market will stall without the support of the now expired tax incentive lead us to continue to expect monetary conditions to remain highly accommodative with the Fed funds target staying in its 0% to 0.25% range until late this year.

In a separate release this morning, April’s S&P/Case-Shiller 20-City Composite measure of U.S. house prices increased for the first time in seven months, rising 0.8% from March because sales activity received a boost from the Federal homebuyers’ tax credit. On a year-over-year basis, the headline index beat market expectations for a strong 3.4% increase by rising 3.8%, the largest annual gain since September 2006.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.