Consumer Confidence Falls for Third Month in July
Rising prices and interest rate hikes are expected to weigh on consumer spending and economic growth over the next six months.
The Conference Board’s consumer confidence index fell to 95.7 in July from 98.4 in June.
“As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July,” said Lynn Franco, senior director of economic indicators at The Conference Board.
The consumer price index, which measures the average change in prices over time consumers will pay for a basket of goods and services, rose 1.3 percent month-over-month in June and 9.1 percent year-over-year, exceeding analyst estimates to mark the fastest pace for inflation since November 1981.
Franco noted the decrease in consumer confidence was driven by a decline in the Present Situation Index, which measures consumers’ outlook on current business and labor market conditions, and signals that growth has slowed at the start of the third quarter.
The Present Situation Index fell to 141.3 in July from 147.2 last month.
The percentage of consumers who said current business conditions are “good” decreased to 17 percent month-over-month from 19.5 percent, while those who said conditions were “bad” also increased, up to 24 percent, compared with 22.8 percent in June.
Consumers also had a bleak view of the labor market, with 50.1 percent of respondents saying jobs are “plentiful,” down from 51.5 percent last month.
More consumers felt jobs were “hard to get,” up to 12.3 percent from 11.6 percent in June.
The Expectations Index, which measures consumers’ short-term outlook for income, business, and labor market conditions, fell to 65.3 from 65.8.
“The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers,” Franco said.
As for the business outlook, fewer respondents expect business conditions to improve, down to 14 percent from 14.6 percent in June.
However, fewer expect conditions to worsen, down to 27.2 percent from 29.7 percent last month.
Consumers’ view of the short-term labor market was also mixed, with only slightly fewer respondents expecting more jobs to be available, down to 15.7 percent from 15.9 percent.
But, fewer respondents also expect there to be fewer jobs, down to 21.4 percent from 22.2 percent.
Consumers were less optimistic about short-term financial prospects, with 14.7 percent expecting incomes to increase, down from 16.1 percent last month.
More respondents expect their incomes to decrease, up to 15.7 percent from 15.3 in June.
Franco shared her prediction for the months ahead.
“Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months.”
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