Consumer Confidence Plunges In June

Consumers are feeling a lot less confident these days, according to the Conference Board, whose monthly Consumer Confidence Index fell to 58.5 in June, down from 61.7 in May.

It's at its lowest level since last November as consumers fret about the job market and the economy as a whole.

“This month’s decline in consumer confidence was driven by a less favorable assessment of current conditions and continued pessimism about the short-term outlook,” said Lynn Franco, Director of The Conference Board Consumer Research Center.

“Consumers rated both current business and labor market conditions less favorably than in May, and fewer consumers than last month foresee conditions improving over the next six months.”

Worrying about jobs

What exactly is causing the sense of unease? Franco says inflation fears eased considerably in June, but concerns about income prospects increased. Given the combination of uneasiness about the economic outlook and future earnings, she says consumers are likely to continue “weighing their spending decisions quite carefully.”

That, of course, would be bad news for the recovery, since consumer spending makes up roughly 70 percent of the U.S. economy. If consumers continue to spend less, the economy will have greater difficulty maintaining a recovery.

Only 14.3 percent of consumers describe current business conditions as “good,” while those describing conditions as bad increased to 38 percent.

Consumers’ assessment of the job market was also less favorable. Those stating jobs are “hard to get” increased to 43.8 percent from 43.5 percent, while those stating jobs are “plentiful” decreased to 5.2 percent from 5.7 percent.

Connecting the dots

It's clear that the economy has slowed over the course of the spring, though economists have yet to connect any dots. At a recent news conference, Federal Reserve Chairman Ben Bernanke confessed he didn't understand why the economy had “hit a soft patch.”

Could it have anything to do with gasoline prices? The price of fuel steadily rose from October through early May. By the time prices peaked on May 5, consumers were spending well over a dollar a gallon more for gasoline than they did last year. 

For the average consumer, that amounted to an extra $20 or so per fill-up. That could be enough to erode anyone's confidence.