Dive Brief:
- After two months of ticking up, consumer confidence dropped to its lowest level since September 2017, according to a report by The Conference Board.
- The group's Consumer Confidence Index dropped nearly 10 points in June to 121.5. Another index based on consumers' outlook for income, business and labor market conditions also dropped. Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement that "[t]he escalation in trade and tariff tensions earlier this month appears to have shaken consumers' confidence."
- A separate consumer sentiment index by the University of Michigan also showed a 1.8% drop from May to June as well as a 4.5% drop in a consumer expectations index. The university's Institute for Social Research said that the decline was due to households in the top third of income distribution, who most frequently cited tariffs.
Dive Insight:
The two surveys taken together show that consumers are listening to talk of a trade war with China and threats of new import taxes that would, as retailers from Walmart to Macy's have said, raise prices at retail outlets across the spectrum.
Indices of consumer confidence throughout the year have sent mixed signals, and total retail sales have fluctuated. Most recent figures showed retail sales ticking up in May after declines earlier in the year.
Moody's vice president Mickey Chadha said of the May sales that they showed a still-confident American consumer, while NRF Chief Economic Jack Kleinhenz expressed even more confidence, writing at the time that they "reinforce the ongoing strength of the consumer and are consistent with a pick up in the pace of the economy in the coming months."
The trade war seems to have reached at least a temporary truce after President Donald Trump said the U.S. and China will resume trade negotiations and the administration will hold off on planned 25% tariffs on $300 billion in goods, that would have touched a wide swath of products.
It's not clear yet whether renewed talks will boost consumer sentiment. But it is clear that consumers reacted to the threat of price increases on goods coming from China, and they expected to feel some pain.
