Consumer expectations remained upbeat with June’s Consumer Confidence Index up 118.9 to reach a near 16-year high. Optimism is also reflected in the current mood with the reading improving to 146.3 in June. Meanwhile, expectations eased to 100.6 in June. Despite some softening, we are upbeat on the economic momentum, reflected by the business sentiment on the improving environment as well as the labour market condition. Hence, we reiterate our view that: (1) the Fed still has room to raise another 25bps on its policy rate in 2H2017; and (2) the economy will grow around 2.0% in 2017 with inflationary pressure continuing and wages growing moderately.

• Consumer expectations remained upbeat on expectations that the domestic economy will expand in the months ahead. It is reflected in June’s Consumer Confidence Index which rose to 118.9 from 117.6 in May, a near 16-year high. Optimism is also reflected in the current mood. The reading improved to 146.3 in June from 140.6 in May.

• Meanwhile, expectations eased to 100.6 in June from 102.3 in May. Despite some softening, we are upbeat on the economic momentum. Optimism on businesses is improving with a reading of 30.8% in June from 29.8% in May, while those citing ”bad” fell to 12.7% in June from 13.9% in May. At the same time, the labour market sentiment rose to 32.8% in June from 30% in May, while those foreseeing a tough labour market fell to 18% in June from 18.3% in May.

• From the latest data, we reiterate our view that: (1) the Fed still has room to raise another 25bps on its policy rate in 2H2017; and (2) the economy will grow around 2.0% in 2017 with inflationary pressure continuing and wages growing moderately. Supporting our view is the latest business conditions expectation over the next six months that saw a drop to 20.4% from 21.5% in May while those expecting business conditions to worsen fell to 9.9% in June from 10.3% in May.

Source: AmInvest Research - 28 Jun 2017