ANN ARBOR—June’s small overall decline in consumer confidence was entirely due to households with incomes in the top third of the distribution, who more frequently mentioned the negative impact of tariffs—cited by 45%, up from 30% last month, according to the University of Michigan Surveys of Consumers.

Most of the June slippage was concentrated in prospects for the national economy, with the unemployment rate expected to inch upward instead of drifting downward in the year ahead, said economist Richard Curtin, director of the Surveys of Consumers.

Interest rates were anticipated to rise by the fewest respondents in six years, and declines in mortgage rates have begun to have a positive impact on home buying.

While more negative trade news will act to decrease consumer spending, the persistent overall strength in consumer confidence is still consistent with growth of real personal consumption expenditures by 2.5% during the next 12 months, Curtin said.

“While the overall level of sentiment has remained largely unchanged at very favorable levels in the past two years, the two main components of the Sentiment Index have significantly diverged,” he said. “Although the cyclical peak in the Current Conditions Index was nearly identical in the two 10-year expansions, the peak in the Expectations Index was much lower than recorded in the 1990s expansion.

“Since it is the Expectations Index, rather than the Current Conditions Index, that is most closely tied to changes in discretionary purchases, it should be no surprise that the annual growth rate in real personal consumption was 2.6% in the past two years, half the 5.2% average from 1998 to 2000.”

New Record Economic Expansion

The U.S. expansion is on the verge of setting a new record. The 10-year expansion from June 2009 to June 2019 has now tied the prior record from March 1991 to March 2001. Next month it will become the longest expansion since the mid-1850s.

Persistent Strength in Personal Finances

Favorable trends in personal finances remained widespread, with 53% of all households reporting improved finances, and 44% of households expecting financial gains during the year ahead—both figures were largely unchanged during the past year at those favorable levels. Across all households, a median income increase of 2% was anticipated in June; for those under 45, income gains of 4.3% were anticipated during the year ahead.

Buying Attitudes Improve

Buying attitudes toward durables rose to their best level in six months, with the renewed strength mainly due to those with incomes in the bottom two-thirds. Home buying improved due to lower mortgage rates and confidence in future incomes.

Consumer Sentiment Index

The Consumer Sentiment Index was 98.2 in June 2019, down from 100.0 in May and the same as last June’’ figure. The Expectations Index was 89.3 in June, between last month’s 93.5 and last year’s 86.3. The Current Conditions Index was 111.9, between May’s 110.0 and last year’s 116.5.

About the Surveys

The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95-percent level in the Sentiment Index is 4.8 points; for Current and Expectations Index the minimum is 6 points.

More information:

• Surveys of Consumers
• U-M Institute for Social Research