Concerns about inflation — rising gas and food prices, in particular — continued to weigh on consumers, according to The Conference Board.
U.S. consumer confidence fell to a 1-1/2 year low in July as consumers grew more pessimistic about current conditions.
The consumer confidence index fell to 95.7 in July, down from a revised 98.4 in June, according to The Conference Board.
The decrease was driven primarily by a decline in the Present Situation Index, which is based on consumers’ assessment of current business and labor market conditions. It fell to 141.3 from 147.2 last month — a sign that growth has slowed at the start of the third quarter, according to Lynn Franco, senior director of economic indicators at The Conference Board.
Meanwhile, the Expectations Index —based on consumers’ short-term outlook for income, business, and labor market conditions — ticked down to 65.3 from 65.8.
“The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist,” said Franco.
Concerns about inflation — rising gas and food prices, in particular — continued to weigh on consumers, Franco said, adding that as the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July. (The Fed is expected to raise its benchmark rate by another 75 basis points on Wednesday.)
“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,” she said.
Below are highlights from the July report.
Consumers’ appraisal of current business conditions was less favorable in July.
17.0% of consumers said business conditions were “good,” down from 19.5%.
24.0% of consumers said business conditions were “bad,” up from 22.8%.
Consumers’ assessment of the labor market was less optimistic.
50.1% of consumers said jobs were “plentiful,” down from 51.5%.
12.3% of consumers said jobs were “hard to get,” up from 11.6%.
Expectations Six Months Hence
Consumers were mixed about the short-term business conditions outlook in July.
14.0% of consumers expect business conditions will improve, down from 14.6%.
Conversely, 27.2% expect business conditions to worsen, down from 29.7%.
Consumers were also mixed about the short-term labor market outlook.
15.7% of consumers expect more jobs to be available, down marginally from 15.9%.
Conversely, 21.4% anticipate fewer jobs, down from 22.2%.
Consumers were more pessimistic about their short-term financial prospects.
14.7% of consumers expect their incomes to increase, down from 16.1%.
15.7% expect their incomes will decrease, up from 15.3%.