Given the headline-grabbing swoon on Wall Street and continued revelations of corporate financial misconduct, U.S. consumers entered the second half of 2002 understandably anxious about their economic future. However their expectations for an eventual economic recovery appeared bright. In the absence of other dramatic events, such as another terrorist attack on U.S. soil, consumers should gradually grow more confident about the U.S. economic future over the remainder of 2002.
The Conference Board's Consumer Confidence Index (CCI) fell 3.5% from May to June, after rising during four of the previous six months. June's reading of 106.4 on the Conference Board's scale, on which average confidence during the year 1985 is equal to an index level of 100, was 10.5% lower than during June 2001.
The "present situation" subindex of the CCI declined by 4.9% during June, and remained 33.4% below the super-confident June 2001 index level. The CCI's "Expectations" component, defined as six months into the future, was 2.6% lower in June than in May. But compared with June 2001, expectations improved by 14.3% — a positive sign for the strength of consumer spending over the balance of 2002, although not as positive as during April and May.
The CCIs for six of the nation's nine regions fell between the figures for May and June. The steepest losses were in the Middle Atlantic (-11.6%), East North Central (-10.9%) and Pacific Coast (-8.9%) regions of the U.S. At the same time, solid over-the-month improvement in consumer confidence occurred in the West North Central (+9.1%), East South Central (+8.3%) and South Atlantic (+6.2%).
Overall confidence levels in June were lower than consumers' overall assessment of economic conditions during mid-2001 for all regions of the U.S. Confidence was much lower in June than at midyear 2001 in the Middle Atlantic (-22.5%) and East North Central (-17.1%) states, but relatively unchanged in the South Atlantic (-1.4%) and East South Central (-2.7%) regions.
In a separate part of the June consumer survey commissioned by the Conference Board, little evidence was seen of sustained improvement in the actual buying plans, as opposed to subjective "confidence" sentiment, of American households.
The percentage of consumers indicating that they planned to buy a home during the next six months declined from 3.6% in May to 3.3% during June. This was the lowest level recorded since last November.
Motor vehicle purchase plans also continued to ease. During June, 7.6% of those surveyed said they planned to buy an automobile in the near future, down from 7.9% in April and May.
In addition, consumers were less enthusiastic during June about other medium-ticket purchases over the next six months of this year than they had been earlier in the year. An estimated 28.9% of consumers surveyed during the month said they planned to purchase a major appliance during the next six months, much lower than the 31.3% level recorded during April.