Dive Brief:

• Consumer confidence fell this month as short-term expectations dimmed for both income and business conditions, the Conference Board said Tuesday.
• Although less worried about a recession than last month, consumers hold a grimmer view of their family financial situation both in the present and for the next six months, according to the Conference Board.
• “Consumers remain relatively downbeat about the near-term economic outlook, pointing to a further slowdown in spending growth ahead,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said Tuesday in a note to clients. The share of consumers expecting business conditions to improve in the next six months slumped to the lowest level since October 2011, he said.

Dive Insight:

Several sets of data have recently signaled weaker consumer spending, which fuels nearly 70% of economic growth.

“American consumers have driven the current expansion, bolstered by strong income growth,” Federal Reserve Governor Lisa Cook said Tuesday. “But recent data, including first-quarter household spending and retail sales for April and May, suggest that growth is slowing.”

Retail sales rose just 0.1% in May and were revised downward for the prior two months, the Commerce Department said last week, spotlighting the strains on consumers from inflation, waning pandemic savings, a cooling labor market and borrowing costs persisting near a two-decade high.

Also, the total amount of credit-card balances and other types of revolving consumer debt shrunk in April for the first time since 2021, Cook said in a speech to the Economic Club of New York.

Meanwhile, the proportion of late credit card payments has increased and the delinquency rate of auto loans has hit a 13-year high, she said. “Signs of strain continue to emerge among consumers with low-to-moderate incomes, as their liquid savings and access to credit have increasingly become exhausted.”

The Conference Board report aligned with a decline in consumer sentiment — as measured by the University of Michigan — to the lowest level since November. Flagging incomes and concerns about high prices dimmed consumers’ views toward their financial well-being, Joanne Hsu, director of the university’s surveys of consumers, said in a June 14 statement.

Real consumption growth on an annualized basis has slowed to 2% from more than 3% during the second half of last year, according to Ginger Chambless, head of research for commercial banking at JPMorgan Chase, said Monday in a client note.

“Depleted excess savings, rising debt service headwinds and tempered labor market expectations are likely all contributing to the moderation of consumer spending,” she said in a client note.

Since mid-2023, consumers have drawn on credit and savings as income growth lagged spending growth, S&P Global Ratings U.S. Chief Economist Satyam Panday said Monday in a client report. “Excess savings are likely depleted for all but the highest-income households.”

“Higher interest rates have led to soaring interest payments as a share of personal income,” Panday said, predicting that consumers will trim spending on both goods and services in the months ahead.