US consumer confidence rises in June

Durable goods orders fell in May

WASHINGTON, June 27, (Agencies): US consumer confidence rose slightly this month, returning to near-record highs after a modest dip in May, according to a monthly survey released Tuesday.

Consumer sentiment about current conditions improved but hopes for quickening economic growth have dimmed, according to the Conference Board.

The closely-watched index rose 1.3 points to 118.9, defying the expectations of analysts who had predicted another slight decrease — partly in expectation of a hit from concerns over the FBI investigation into the Trump administration’s Russia ties.

All of June’s increase was in the Present Situation Index, which rose 5.7 points to 146.3.

“Expectations for the short-term have eased somewhat but are still upbeat,” Lynn Franco, the Conference Board’s economic indicators chief, said in a statement.

“Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating.”

The share of survey respondents saying current conditions are “good” rose one percentage point to 30.8 percent while those saying they are “bad” fell 1.2 points to 12.7 percent.

The share of those saying jobs were “plentiful” also rose and those saying they were “hard to get” fell.

But consumers were slightly gloomier about the short term: those expecting business conditions to improve over the next six months fell 1.1 points to 20.4 percent. But those expecting them to worsen also fell a token 0.4 points to 9.9 percent.

Analysts agreed the confidence measures indicate consumer spending is poised to increase, even though optimism has slipped slightly.

“Americans are also more upbeat about future economic prospects since the November presidential election, but that optimism has diminished somewhat in recent months,” James Bohnaker, senior economist at IHS Markit, said.

However, “This report does not alter our consumer outlook. Looking ahead, the fundamentals for robust consumer spending are in place,” he said, forecasting three percent spending growth.

Ian Shepherdson of Pantheon Macroeconomics, who has been critical of the survey in the past, said high expectations are overstating the pace of consumption growth.

But even though “post-election euphoria is fading ... modest declines in the expectations index are nothing to worry about.”

Meanwhile, demand for long-lasting US factory goods fell by the most in 18 months, and a key category that tracks business investment also slipped, evidence that manufacturing output is barely growing.

Orders for durable goods — items meant to last at least three years — slid 1.1 percent in May, the Commerce Department said Monday. It was the second straight decline.

US manufacturing production has slowed after a solid start to the year. Business investment in new equipment jumped in the January-March quarter but has leveled off since then. Orders for capital goods, excluding aircraft and military equipment, slipped 0.2 percent last month, a sign businesses are trimming their spending.

Most of the bad news in the report was concentrated in the volatile civilian and military aircraft categories, where orders plunged. Excluding transportation goods, orders actually ticked up 0.1 percent, after dropping the previous month.

There were some other positive signs: Orders for new cars rose for the second straight month. Orders also increased for industrial machinery, steel and other metals, and appliances.

Still, other recent data suggests manufacturing has stumbled after a strong winter. Factory output fell modestly in May, according to the Federal Reserve.

Americans have tempered their recent enthusiasm for new cars: Auto sales have fallen for five straight months after reaching a record level last year.

That suggests the May increase in automotive orders may not be sustained.

Budget

The IMF said the Trump budget plan put a disproportionate share of spending cuts onto low- and middleincome households, adding that it “would appear counter to the budget’s goals of promoting safety and prosperity for all Americans.”

Instead, the Fund suggested a tax policy that would improve the federal revenue-to-GDP ratio, more balanced cuts that strengthen the social safety net’s efficiency, and efforts to contain healthcare cost inflation.

The IMF warned that “significant policy uncertainties imply larger-thanusual” risks to the US outlook on either side, since spending cuts could lower growth, while tax cuts could provide stimulus and expand the economy.

Even while the US is seeing its third longest expansion since 1850 and is at full employment, the world’s largest economy is facing rising public debt and an overvalued currency — which tends to hinder exports.

“A comprehensive policy package is needed,” the report said.

The fund welcomed the administration’s objectives to bring down debt and adjust spending policies “to finance priorities such as infrastructure.”

However, the discussions “revealed differences on a range of policies and left open questions as to whether the administration’s proposed policy strategies are best suited to achieve their intended purpose.”

In fact, the fund called into question the stated goal of the Trump administration to accelerate growth to more than three percent.

“The international experience and US history would suggest that a sustained acceleration in annual growth of more than 1 percentage points, as projected by the administration, is unlikely,” the report said.