By Xavier Fontdegloria

Consumer confidence in the U.S. fell in June for a second consecutive month as Americans' views on the short-term outlook deteriorated markedly amid persistently high inflation.

Private research group The Conference Board said Tuesday that its consumer confidence index fell to 98.7 in June from a revised 103.2 in May, the lowest reading since February 2021. Economists polled by The Wall Street Journal expected the index to decline to 100.

The drop in confidence was driven by a sharp decrease of the expectations index, which gauges short-term outlook for income, business and labor-market conditions. The indicator fell to 66.4 from 73.7, its lowest level since March 2013.

"Consumers' grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices," said Lynn Franco, The Conference Board's senior director of economic indicators.

The current subdued level of the expectations index suggests weaker growth in the second half of 2022 as well as growing risk of recession by year end, she said.

U.S. inflation reached 8.6% in May, its highest level in more than four decades as surging energy and food costs pushed prices higher.

Vacation plans among Americans softened over the month amid rising prices, Ms. Franco said. Purchasing intentions for big-ticket items such as cars, homes and major appliances held relatively steady in June, but are set to cool in the coming months as the Federal Reserve raises interest rates, she said.

Consumer confidence is a closely watched indicator that can be a bellwether for household spending, which is a major growth driver for the U.S. economy.

The Conference Board's gauge stands well below its prepandemic levels, but worsening confidence hasn't caused a significant pullback in consumer spending as a strong labor market supports household incomes.

"A strong labor force has provided insulation from many of the inflationary headwinds denting sentiment and clouding the macroeconomic picture, and I expect overall consumption to remain healthy until the labor market begins to crack," said Matt Orton, Chief Market Strategist at Carillon Tower Advisers.

In June, Americans were slightly less optimistic about the labor market, albeit consumers still viewed the job conditions as favorable.

The present situation index, based on consumers' assessment of current business and labor market conditions, fell slightly to 147.1 in June from 147.4 in May.

"Looking ahead over the next six months, consumer spending and economic growth are likely to continue facing strong headwinds from further inflation and rate hikes," Ms. Franco from The Conference Board said.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

June 28, 2022 10:45 ET (14:45 GMT)