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Lower expectations drag down consumer confidence

WASHINGTON (MarketWatch) -- U.S. consumer confidence has declined for a fourth month, with gloomier views in June on future business conditions and income, the Conference Board reported Tuesday.

The consumer-confidence index fell to 62 in June -- the lowest level since January -- from a revised 64.4 in May. A prior estimate for May had pegged the level at 64.9.

Generally, when the economy is growing at a good clip, confidence readings are at least 90. Economists polled by MarketWatch had expected confidence to decline to 63 in June. See economic calendar.

U.S. stocks were negative in morning trade.Read Market Snapshot.

"If this trend continues, spending may be restrained in the short term," said Lynn Franco, director of economic indicators at the Conference Board, a private research group.

The drop in consumer confidence comes as recent economic indicators have disappointed. For instance, the U.S. Department of Labor said the economy gained a weak 69,000 jobs in May. See earlier story on jobs growth.

Republican presidential candidate Mitt Romney said the recent data underscore the weak economy under President Barack Obama. "Today's report on the decline in consumer confidence is the latest in a string of poor indicators for job growth and the economy," he said in a statement.

According to Conference Board data, those with plans to buy major appliances within six months fell to 45.5% in June from 47.4% in May. Meanwhile, those with plans to buy an automobile remained at 10.6%. And those with plans to buy a home increased to 5% from 4.7%.

While consumers' expectations declined, consumers' views on the present situation rose in June. Overall, the data suggest that there may be "little change" in the pace of near-term economic activity, Franco said.

While current readings remain low, confidence may not slide much further going forward, said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

"We expect to see all the consumer confidence numbers improve somewhat over the next few months as the cash-flow benefit from cheaper gas boosts spending power," Shepherdson said.

However, stock market weakness could hamper confidence gains, analysts said.

"Looking ahead, the fall in gasoline prices should provide a short-term boost to real consumption. But confidence could easily fall further if equity prices continue to tumble," said Amna Asaf, an economist at Capital Economics.

Details

The Conference Board's gauge of consumers' expectations fell to 72.3 in June from 77.3 in May. Those expecting business conditions to be better in six months fell to 15.5% from 16.6%, while those expecting worse conditions rose to 16.2% from 12.9%. The rest expect the same conditions. When it comes to income, those expecting an increase fell to 14.8% in June from 15.7% in May, while those expecting a decrease rose to 14.5% from 14.2%. The rest expect the same income.

Meanwhile, a barometer of the present situation rose to 46.6 in June from 44.9 in May. Those saying business conditions are good rose to 14.9% from 13.6%, while those saying conditions are bad rose to 35.1% from 34.7%. The rest said conditions are normal.

To assess how consumers view the employment environment, economists follow a labor-market statistic derived from the Conference Board's report. The labor differential subtracts the percentage of respondents who said jobs are "hard to get" from the percentage who said jobs are "plentiful."

The labor differential hasn't been positive since January 2008, near the beginning of the Great Recession. In June the labor differential widened to negative 33.7% -- the lowest since January -- compared with negative 33.4% in May. The decline in June suggests that it's unlikely that the unemployment rate will fall soon, analysts said.

"All in all, the report does not seem to suggest any significant change in recent economic trends and we think it consistent with modest growth and relatively sluggish job creation," said analysts at RDQ Economics.

Consumers' expectations for inflation over 12 months declined to 5.3% in June from 5.6% in May.

Also Tuesday, S&P/Case-Shiller data indicated that U.S. home prices rose in April for the first monthly gain since last autumn. Read more about home prices.