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Consumers Confident for the Moment, But Glum About Future

American-flag-moneyA notable drop in gross domestic product (GDP) in the first quarter—the largest decline since 2009, according to the Bureau of Economic Analysis—did not appear to shake consumer confidence, according to the June Survey of Consumers from Thomson Reuters and the University of Michigan. While GDP fell 2.9 percent in the first quarter, the June sentiment survey actually showed slight improvement over the month with a gain of 0.7 percent.

The gain is a result of improvement in consumers' view of current conditions, which outweighed a small decline in their outlook on the future. The Current Conditions Index experienced a 2.2 percent increase in June, while the Index of Consumer Expectations ticked down 0.3 percent.

"Given that they ignored the dismal 1st quarter results, they are also likely to ignore the announcement of more favorable 2nd quarter GDP results in the months ahead," said Richard Curtin, chief economist for the Surveys of Consumers.

Consumers largely chalked up the GDP decline to the winter storms early in the year and appeared to be encouraged by recent job growth. In fact, more survey respondents reported improving finances than in any survey since 2007, according to the University of Michigan survey.

Forty percent of households said their finances had improved in the June survey, an increase from 35 percent both last month and last year.

A positive sign for the housing market, about half of survey respondents reported "selling conditions were favorable for the first time in eight years," according to the survey.

Despite their positive reflection of current conditions, consumers did not harbor a very optimistic outlook toward the future. Three out of four households do not expect their finances to improve over the next year. The survey detected a broad-based concern that wage growth would not keep pace with inflation, "meaning that nearly half of all households anticipated declining living standards," according to the University of Michigan.

The Thomson Reuters/University of Michigan survey was released on the heels of the Consumer Confidence Index from the Conference Board. While both indexes reported overall increases in consumer confidence in June, they varied when it came to expectations.

While the University of Michigan survey reported pessimism based on wage growth, the Conference Board reported a rise in its Expectations Index based on anticipation of improving business conditions and labor conditions.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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