Author: RBC Financial Group Economics Department

• US consumer confidence fell by 2.4 points to 62.0 in June 2012 from a downwardly revised 64.4 reading in May (previously was 64.9). Market expectations were for a reading of 63.0.
• The dip in the headline index reflected declines in consumers’ expectations for the next six months while appraisals of current conditions improved modestly.
• The current employment differential slipped to -33.7 from -33.4 in May as the increase in those reporting jobs as “hard to get” outpaced the gain in consumers reporting jobs as “plentiful.”
• The deterioration in consumer confidence seen in recent months likely reflects the slowing in employment growth that has dampened households’ views on labour market conditions. As well, the re-intensification of the debt crisis in Europe and the resultant heightened level of uncertainty with respect to the global economic outlook are likely also weighing on sentiment and will probably continue to do so for the near term.
• In a separate release this morning, the seasonally adjusted S&P/Case-Shiller 20-City Composite measure of US house prices jumped up 0.7% on a month-over-month basis in April, thereby beating market expectations for a 0.3% monthly increase.

 

The Conference Board’s measure of US consumer confidence declined by 2.4 points to 62.0 in June 2012 from a downwardly revised 64.4 in the previous month (initially reported as 64.9). The decline in the headline index was the fourth consecutive and reflected consumers being less optimistic about the short-term outlook, with the “expectations for six months hence” component dropping to its lowest level since last November as down to 72.3 from 77.3 in May. In contrast, consumers’ appraisals of current conditions improved modestly in the month as indicated by the “present situation” component rising to 46.6 from 44.9 in the previous month.

With respect to labour market conditions, those saying jobs were “plentiful” rose to 7.8% from 7.5% in May while those saying jobs were “hard to get” saw a slightly larger increase to 41.5% from 40.9%. This resulted in the labour market differential (the difference between the percent saying jobs are “plentiful” versus “hard to get”) deteriorating to -33.7 in June from the -33.4 reading in the previous month.

The deterioration in consumer confidence seen in recent months likely reflects the slowing in employment growth that has dampened households’ views on labour market conditions. As well, the re-intensification of the debt crisis in Europe and the resultant heightened level of uncertainty with respect to the global economic outlook are likely also weighing on sentiment and will probably continue to do so for the near term. With that said, our expectation of a gradual improvement in labour markets conditions combined with increasing evidence that housing markets are finally stabilizing should help to improve sentiment and support a modest acceleration in consumer spending during the remainder of the year.

In a separate release this morning, the seasonally-adjusted S&P/Case-Shiller 20-City Composite measure of US house prices jumped up 0.7% on a month-over-month basis in April, thereby matching the upwardly revised gain seen in the previous month (initially reported as a 0.1% increase) and marking the third consecutive monthly increase in the measure. Despite the sizable monthly gain, home prices remain below their year-ago level with the unadjusted index down 1.9% from April 2011’s level; however, this marks an improvement over the larger 2.6% drop in March and represents the smallest annual pace of decline since November 2010.

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.

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