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Trade War and Tariff Issues Take Down US Consumer Confidence

Consumers are starting to feel the impact from concern over trade issues and the possibility of new tariffs in the future, sending The Conference Board’s Consumer Confidence Index for June down 9.8 points to 121.5.

Both components of the Index also saw decreases. The Present Situation Index, which measures current business and labor market conditions, fell to 162.6 from 170.7. The Expectations Index, which measures short-term outlook about six months out, was down to 94.1 from 105.0.

Lynn Franco, senior director of economic indicators at The Conference Board, said that the “escalation in trade and tariffs tensions earlier this month appears to have shaken consumers’ confidence.” She noted, “After three consecutive months of improvement, consumer confidence declined in June to its lowest level since September 2017″ when the Index was at 120.6.

Franco also said that while the Index is still at a high level, continued uncertainty “could result in further volatility in the Index.”

Ryan Sweet, economist at Moody’s Analytics, said, “With the U.S. economy slowing fairly abruptly and the escalation in the trade tensions, confidence is increasingly important. If the collective psyche frays, the recent slowing could morph into something worse.” The economist also noted that data from consumers’ perception of the labor markets was “not as upbeat as that seen in each of the prior two months.”‘

And Tim Quinlan, senior economist at Wells Fargo, said the report indicated that consumers were shaken from an ongoing trade war and a soft May jobs report. He also said that “unless confidence is restored, consumer spending in the second half is poised to slow.” The May jobs report showed that U.S. non-farm payrolls rose by just 75,000 instead of the estimated 180,000 gain.

As for current expectations, those who said business conditions are “good” fell to 36.7 percent from 38.4 percent. On the labor front, those who claimed that jobs are “hard to get” increased to 16.4 percent from 11.8 percent.

Looking ahead, the number of respondents who believe business conditions will be better six months from now fell to 18.1 percent from 21.4 percent, and those who said they expect business conditions to worsen rose to 13.1 percent from 8.8 percent. More importantly, on the labor front, those who expect fewer jobs in the months ahead rose to 14.8 percent from 13.0 percent.

As for their own spending power, the percentage of respondents who said they expect an improvement in their short-term income prospects fell to 19.1 percent from 22.2 percent.