During the nearly two-week period since voters in the United Kingdom decided their country should leave the European Union, reports about the American economy and U.S. consumers have been generally upbeat.
The Conference Board’s Consumer Confidence Index for June was up smartly, and personal income and consumer spending reports for May pointed to a stronger second-quarter gross domestic product.
At the close of the week, data from automakers showed that they were on pace for their best June sales in more than 10 years. The Wall Street Journal said cheap gas and easy credit are contributing to confidence among car buyers and inducing many people to buy higher-priced trucks or SUVs.
Sales at Ford Motor Co. rose 6.4 percent, to 239,096 light vehicles, in June. Truck sales were up 24 percent, and SUV sales were up 7.3 percent.
Fiat Chrysler Automobiles NV said it had a 6.5 percent increase in U.S. auto sales, led by demand for its Jeep vehicles. The Italian-U.S. automaker sold 197,073 vehicles during the month — its best June sales in 11 years — up from 185,035 in the same month last year.
“As we head into summer, sales should stabilize just slightly ahead of last year’s pace,” Kelley Blue Book analyst Tim Fleming told the Journal.
The only consideration that could crash the party is that because the information gathered for the reports mostly predates the June 23 U.K. vote — an overseas development that could shake consumer confidence here at home — economy watchers can’t be sure the positive trends will continue.
One barometer that is up to date, reliable and telling is the performance of the stock markets, and they have delivered reassuring news. The Dow Jones industrial average, S&P 500 index and Nasdaq composite index suffered sharp losses after Brexit on June 24 and 27 — their worst two-day decline in 10 months — but they began to reverse course the next day. By the end of last week they had risen for four days in a row and erased nearly all of their Brexit-related losses.
"We’re reversing the 'Brexit' as it becomes evident that it was more of a political vote and decision than an economic decision," Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Ala., told Reuters.
What we learned from the Conference Board’s report was that consumers’ mood, at least through the middle of June, was the brightest it has been since last October. The board’s widely followed index rose to 98 from 92.4 the previous month as Americans’ view of current conditions was the most positive it has been since September. That development bodes well for people who sell household goods.
“The sharp rise in the Conference Board’s measure of consumer confidence in June suggests that the recent acceleration in consumer spending growth is set to continue,” Andrew Hunter, assistant economist at Capital Economics, told the Wall Street Journal.
Consumer spending was indeed higher in May, although the 0.4 percent growth the Commerce Department reported was far lower than the 1.1 percent jump a month earlier. Incomes rose 0.2 percent, a figure that was below forecasts.
Bloomberg argued that steady job growth and wages that are starting to rise likely will boost household spending. Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, told Bloomberg that consumers are doing relatively well.
“The consumer will do OK because the household sector is in very good fundamental shape,” LaVorgna said.
This week’s reports will be few, but telling. On Wednesday we will see the minutes from the June 16 meeting of the Federal Open Market Committee, the Federal Reserve’s rate-setting panel.
The Fed left interest rates unchanged at that meeting amid worries about slow productivity growth, among other factors. Productivity has risen by an average of just 0.5 percent a year for the past five years, compared with 3.5 percent during the recovery from the 2001 recession, say the federal Department of Labor and Dean Maki, chief economist of Point72 Asset Management.
Reuters said six of the Fed’s 17 policymakers are now projecting just one rate increase this year. The central bank’s stated goal had been to raise rates twice in 2016.
"We do need to make sure that there's sufficient momentum [in the economy]" before taking action on rates, Fed chairman Janet Yellen told a press conference after the June meeting.
On Friday we will get the June jobs report, which will get an especially close look after the Labor Department said the U.S. economy created just 38,000 jobs in May.
Later that day, we will see the May report on consumer credit. Growth in credit slowed in April after reaching a 15-year high in March. The Fed said total consumer credit increased $13.4 billion, below the $18 billion median estimate of economists Bloomberg surveyed.