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In June, the US Conference Board’s consumer confidence weakened for a fourth consecutive month, reaching its lowest level since early this year. The index dropped from a downward revision of 64.4 to 62.0, while only a marginal decline was expected (to 63.0). The breakdown shows that consumers became more pessimistic about the outlook as the expectations index fell from 77.3 to 72.3.
Consumers became also more worried about the jobs market as the labor market differential dropped from -33.4 to -33.7. After a sharp improvement in consumer sentiment at the end of last year and early this year, consumer sentiment is now worsening again. The stalling labor market recovery is probably weighing on sentiment and might encourage consumers to be more cautious in their spending.
After already a poor Empire State manufacturing index and Philadelphia Fed index, also the Richmond Fed index surprised on the downside of expectations in June. The Richmond Fed index dropped for a second straight month, from 4 to -3, while only a marginal decline was forecast. For the first time since October last year, the index is again in negative territory. The details are poor too, as new orders, capacity utilization (-8 from 2), average workweek (-2 from 11), vendor lead time and number of employees (8 from 16) weakened sharply compared with the previous month.
Also shipments (-2 from 0) weakened slightly further in June, while order backlog (-16 from -18) and wages (8 from 6) picked up slightly. Recently, the US manufacturing ISM held up surprisingly well, but the regional business confidence indicators are now all pointing in the same downward direction.
Traders worry that also the manufacturing ISM might show a significant slowdown in momentum in June, providing further evidence that also in the US, the recovery is slowing.
According to the S&P Case Shiller index, US home prices rose by 0.67% m/m in April, more than twice as much as expected. Also the previous figure was sharply upwardly revised, from 0.09% m/m to 0.73% m/m. As a result, the annual rate of decline slowed significantly, from -2.59% to -1.90%, while an outcome of -2.50% was forecast. The monthly rate rose for the third consecutive month in April, which is an encouraging sign and adds to the indications that the US housing market is finally recovering.
The outcome of the consumer confidence report has really shaken the markets, as consumers were expected to be a bit more confident with the drop in oil prices, which reduces the costs of electricity and gasoline at the pump and goes directly into the consumer's pocketbook.
The question is how the Obama Administration jump can start the economy, as it gets stuck in the annual spring stall. With no help from the FOMC, what programs can the government implement to turn the economy back around. In an election year, this spells trouble for President Obama.