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American optimism of future economy drops in June

Slightly more optimistic about current conditions

Americans grew more uneasy about the future of the U.S. economy in June, according to the Survey of Consumers conducted by the University of Michigan.

The Index of Consumer Sentiment dropped to 95.1 in June, down 2.1% from 97.1 in May but still up 1.7% from last year’s 93.5. This is up slightly from the seven-month low hit at the beginning of the month.

“Although consumer confidence slipped to its lowest level since Trump was elected, the overall level still remains quite favorable,” Survey of Consumers Chief Economist Richard Curtin said. “The average level of the Sentiment Index during the first half of 2017 was 96.8, the best half-year average since the second half of 2000, and the partisan gap between Democrats and Republicans stood at 39 Index-points in June, nearly identical to the 38-point gap in February.”

“The partisan divide still meant that June's Sentiment Index of 95.1 was nearly equal to both the average, 95.7, between the optimism of Republicans and the pessimism of Democrats and the value for Independents, 94.6,” Curtin said. “Surprisingly, the optimism among Republicans and Independents has largely resisted declines in the past several months despite the decreased likelihood that Trump's agenda will be passed in 2017.”

An article by Jill Mislinski for Advisor Perspectives explains what this means historically:

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.

“The most important policies to consumers are those that directly or indirectly affect their jobs, incomes, or their financial security,” Curtin said. “Fortunately, increasing uncertainty about future prospects for the economy has thus far been offset by the resurgent strength in the personal financial situation of consumers.”

The part of the index which measures current economic conditions increased slightly from 111.7 in May up 0.7% to 112.5 in June. This represents an increase of 1.5% from 110.8 last year.

However, the Index of Consumer Expectations was less positive with its drop of 4.3% from May’s 87.7 to 83.9 in June. This is still up 1.8% from last year’s 82.4.

“The combination of continuing improvements in personal finances and increasing concerns about the economic outlook is typical around cyclical peaks,” Curtin said. “Nonetheless, the data provide[s] no indication of an imminent downturn nor do[es] the data provide any indication of a resurgent boom in spending.”

“Even with a much improved second quarter, personal consumption spending is expected to advance during 2017 by about 2.3%,” he said.

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