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Uncertain Economic Outlook Clouds US Consumer Confidence

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Consumer sentiment slipped slightly in June as Americans grew anxious about the future of the U.S. economy.

The University of Michigan’s preliminary sentiment index for this month fell to 94.3, a 0.4% decline from May’s 94.7 and down 1.9% from 96.1 a year ago. Economists had expected 94.5.

“Consumers were a bit less optimistic in early June due to increased concerns about future economic prospects,” Richard Curtin, the survey’s chief economist, said in a release, noting, “Consumers do not think the economy is as strong as it was last year nor do they anticipate the economy will enjoy the same financial health in the year ahead as they anticipated a year ago.”

Last month, nearly all of the gains were in the consumer-expectations index, which rose 12.8% from April and was up 3.9% year-over-year. By comparison, June’s reading was 83.2, down 2 percent from May’s 84.9 and a drop of 5.2% from the 87.8 recorded in the same period a year ago.

With that being said, the index tracking consumer views of current economic conditions increased 2.6% year-over-year from 108.9 to 111.7, but Curtin underlined the “growing gap” between that reading and the “renewed downward drift” of the expectations index.

“The strength recorded in early June was in personal finances and the weaknesses were in expectations for continued growth in the national economy,” he said, explaining that consumers rated their current financial situation at the best levels since the 2007 cyclical peak largely due to wage gains. “Prospects for gains in inflation-adjusted incomes in the year ahead were also the most favorable since the 2007 peak, enabled by record low inflation expectations.”

Curtin also said last week’s announcement that just 38,000 nonfarm jobs were added by U.S. employers in May could prompt consumers “to hold down spending to increase their precautionary savings.”

Overall, he said, the data still indicates that real consumer expenditures can be expected to rise by 2.5% in 2016 and 2.7% in 2017.

Michigan’s monthly report surveys 500 households on their attitudes toward business conditions, unemployment, personal finances and inflation.

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