U.S. consumer confidence fell sharply as expectations about economic conditions plummeted in July.
The Conference Board’s Consumer Confidence Index fell to 92.6 from 98.3 in June. Wall Street economists had forecast a milder decline to 95.7, according to Econoday.
The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – improved from 86.7 to 94.2, reflecting the reopening of the economy.
But the Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – fell from 106.1 in June to 91.5 in July.
“Consumer Confidence declined in July following a large gain in June,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index improved, but the Expectations Index retreated. Large declines were experienced in Michigan, Florida, Texas, and California, no doubt a result of the resurgence of COVID-19.”
The percentage of consumers claiming business conditions are “good” was relatively unchanged at 17.3 percent, while those claiming business conditions are “bad” fell from 42.5 percent to 39.1 percent. Consumers’ appraisal of the job market grew sunnier despite Labor Department data showing layoffs have remained around 1.3 million for weeks. The percentage of consumers saying jobs are “plentiful” increased from 20.5 percent to 21.3 percent, while those claiming jobs are “hard to get” decreased from 23.3 percent to 20.0 percent.
Views of the short-term outlook, however, turned grimmer. The percentage of consumers expecting business conditions will improve over the next six months declined from 42.4 percent to 31.6 percent. Those expecting business conditions will worsen increased from 15.2 percent to 19.3 percent.
The outlook for the labor market also turned more pessimistic. The proportion expecting more jobs in the months ahead declined from 38.4 percent to 30.6 percent. Those expecting fewer jobs in the months ahead jumped from 14.4 percent to 20.3 percent. Regarding their short-term income prospects, the percentage of consumers expecting an increase was relatively unchanged at 15.1 percent, while the proportion expecting a decrease rose from 14.1 percent to 15.0 percent, which may be an reflection of the expiration of enhanced unemployment benefits and reports that Republican lawmakers want to decrease the amount of money the federal government chips in to boost the income of jobless Americans.
“Looking ahead, consumers have grown less optimistic about the short-term outlook for the economy and labor market and remain subdued about their financial prospects. Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending,” Franco said.