US Consumer Confidence Slips to 90.8 in July, Weaker Than Expected

The Conference Board’s Consumer Confidence Index fell to 90.8 in July, down from a revised 97.8 in June and below the 99.7 reading economists had anticipated. The decline signals growing unease among Americans about the economic outlook and labor market conditions.

Key Details of the July Decline

The July reading marks the lowest level for the index since November 2023. The Present Situation Index, which measures consumers’ assessment of current business and labor market conditions, also slipped to 133.6 from 135.1. More notably, the Expectations Index — a gauge of consumers’ short-term outlook for income, business, and labor conditions — dropped sharply to 62.3 from 72.8. A reading below 80 has historically signaled a potential recession within the next year.

Labor Market Views Weaken

Consumers’ appraisal of the labor market deteriorated in July. The share of respondents saying jobs are “plentiful” fell to 33.4% from 37.4%, while those saying jobs are “hard to get” rose to 16.6% from 14.5%. This shift reflects growing concerns about hiring conditions and wage growth, even as the overall unemployment rate remains historically low.

Inflation and Spending Concerns

Inflation expectations over the next 12 months edged up to 5.2% from 5.0% in June. Combined with the weaker labor market outlook, this suggests consumers may become more cautious about discretionary spending in the months ahead. Consumer spending accounts for roughly two-thirds of U.S. economic activity, making these sentiment shifts closely watched by policymakers and investors.

Why This Matters

The sustained decline in consumer confidence, particularly in the expectations component, adds to evidence that the U.S. economy is cooling. While the Federal Reserve has held interest rates steady at recent meetings, weakening consumer sentiment could reinforce the case for rate cuts later this year. The data also provides context for upcoming retail earnings reports and back-to-school spending trends.

Conclusion

The July Consumer Confidence Index reading of 90.8 reflects a clear deterioration in American households’ economic outlook, driven by growing pessimism about the labor market and persistent inflation concerns. The data will factor into the Federal Reserve’s next policy decision and offers a cautionary signal for the broader economic trajectory in the second half of 2024.

FAQs

Q1: What is the Consumer Confidence Index?
The Consumer Confidence Index (CCI) is a monthly survey by The Conference Board that measures how optimistic or pessimistic consumers are about the economy. It is based on respondents’ assessments of current business and labor conditions, as well as their expectations for the next six months.

Q2: Why did consumer confidence drop in July?
The decline was driven by a weaker assessment of the labor market, with fewer consumers viewing jobs as plentiful and more reporting jobs are hard to get. Rising inflation expectations also contributed to the more cautious outlook.

Q3: What does a low Expectations Index mean?
The Expectations Index dropped to 62.3 in July. A reading below 80 has historically been associated with an increased risk of a recession within the next year. It signals that consumers expect business conditions, employment, and incomes to worsen.