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COUNTING PENNIES

Inflation hampered US consumer confidence, falling to the lowest level in 16 months as residents worry about the second half.

LUCIA MUTIKANI

WASHINGTON: US consumer confidence dropped to a 16-month low in June as worries about high inflation left consumers to anticipate that the economy would slow significantly or even slide into recession in the second half of the year.

Despite the gloomy outlook, consumers showed little sign of cutting back on spending, with buying plans for motor vehicles and other big ticket items like refrigerators and washing machines increasing, the survey from the Conference Board on Tuesday showed.

But fewer consumers compared to April intended to go away on vacation at home or abroad, reflecting record high gasoline prices and expensive airfares.

The economy is on recession watch as the Federal Reserve aggressively tightens monetary policy to tackle inflation. For now, it continues to grow, with other data on Tuesday showing the goods trade deficit again narrowing significantly in May as exports hit a record high.

The goods trade deficit fell 2.2% to $104.3 billion, the Commerce Department said. Goods exports rose $2 billion to $176.6 billion. Imports of goods slipped $0.4 billion to $280.9 billion.

A record trade deficit weighed on the economy in the first quarter, resulting in gross domestic product declining at a 1.5% annualised rate. Trade has subtracted from GDP for seven straight quarters.

“Right now we are at an inflection point in the economy, where actual spending and economic activity is still positive, however, consumer confidence and financial conditions, especially interest rates, are indicating a slowdown ahead,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

The Conference Board’s consumer confidence index dropped 4.5 points to a reading of 98.7 this month, the lowest since February 2021.

The Conference Board survey places more emphasis on the labour market, which remains tight, but consumers are feeling the inflation pain.

“Consumers hate inflation and this is depressing consumer confidence via the expectation channel even as households see labour market conditions as strong,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

A separate report on Tuesday showed the S&P CoreLogic CaseShiller national home price index increased 20.4% on a year-on-year basis in April after surging a record 20.6% in March. Hefty price gains were recorded in Tampa, Miami and Phoenix.

Signs that house price inflation has probably peaked were reinforced by a third report from the Federal Housing Finance Agency showing home prices increased 18.8% in the 12 months through April after accelerating 19.1% in March.

Nevertheless, the economy is chugging along. A fourth report from the Commerce Department showed the goods trade deficit contracted 2.2% to $104.3 billion in May, suggesting that trade could contribute to economic growth this quarter for the first time in nearly two years.

BUSINESS

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2022-06-30T07:00:00.0000000Z

2022-06-30T07:00:00.0000000Z

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