U.S. Economic Confidence Holds Near Five-Year High in June ........ Even after QE TAPER talks than why is the Whole World Crashing ....... Funny World of Modern Economics

July 2, 2013

U.S. Economic Confidence Holds Near Five-Year High in June

Gallup's Economic Confidence Index is -8 for June, similar to -7 in May

by Alyssa Brown

WASHINGTON, D.C. -- Americans' confidence in the economy held steady in June, despite U.S. stock prices registering a monthly decline for the first time this year. Gallup's Economic Confidence Index averaged -8 in June, on par with -7 in May -- the highest monthly score since Gallup began tracking economic confidence daily in January 2008.

The stronger May and June ratings pushed the average confidence score for the second quarter of 2013 to -9, the third consecutive quarter the index has improved. The -9 second quarter score is also the best Gallup has measured for any quarter to date since it began daily tracking of confidence in 2008.

While U.S. stock prices declined in June, the Dow and S&P still had their best performances in the first half of the year since the late 1990s. Higher stock prices this year and increased optimism about housing prices have likely contributed to Americans' growing confidence.

The results for June are based on Gallup Daily tracking interviews, conducted by landline and cellphone, with more than 15,000 Americans. Gallup's Economic Confidence Index is based on two components: Americans' assessments of current economic conditions in the United States and their perceptions of whether the economy is getting better or worse. Americans remain more negative than positive toward the U.S economy's current state and future momentum.

Americans' net economic outlook was -3 in June, similar to the -1 recorded in May -- the highest monthly economic outlook score in more than five years. The current score is based on 46% of Americans saying the economy is getting better and 49% saying it is getting worse.

Americans' assessments of current economic conditions were essentially unchanged in June, at -12. The score reflects 20% of Americans rating current U.S. economic conditions as excellent or good and 32% saying they are poor.

Economic Confidence Levels Off Across Income Groups

Upper-income Americans' economic confidence was unchanged in June -- after entering positive territory for the first time in May. Similarly, lower- and middle-income Americans' confidence also held steady in June at a five-year monthly high, although it still remains in negative territory.

Bottom Line

Americans' confidence in the economy held steady at a relatively high level in June, despite volatility in the U.S. stock market and a tepid unemployment report from the U.S. Bureau of Labor Statistics. Still, Americans remain more negative than positive about the U.S. economy.

Several challenges in the coming months may affect Americans' confidence in the economy. First, disagreements in Washington over raising the federal debt limit could shake Americans' confidence, as was the case during partisan debates over the fiscal cliff and sequestration. The federal debt is one of Americans' greatest concerns for the nation's future and, therefore, a partisan showdown on this issue could lead to a decline in Americans' economic optimism.

Additionally, 41% of small-business owners said they are holding back on hiring because of the Affordable Care Act. That percentage could increase, and possibly lead to a drop in job creation, in the months leading up to full implementation of the law in January 2014.

Finally, rising interest rates could cause some consumers to feel more wary about taking out loans to make large purchases. This sentiment could negatively affect Americans' views of the overall economy.

U.S. Economic Confidence Holds Near Five-Year High in June