Up and down, up and down. Like a yo-yo dieter’s weight, consumer confidence in the U.S. seems to maintain a consistent pattern. It rose in June when tensions in the Middle East seemed to abate, following a dip in May, likely due to the war with Iran heating up. A ceasefire this past April had the confidence numbers back up.
So perhaps no surprise, the latest data from the nonprofit research firm The Conference Board’s Consumer Confidence Index, released July 28, shows a decline to 90.8, reflecting a cautious sentiment among consumers regarding the economic outlook.
The figure is lower than the forecasted level of 92.4, indicating that consumer optimism is waning more than anticipated, as consumers appear more concerned about economic conditions than previously thought. Analysts had predicted a slight increase in consumer confidence, thinking it would build on the previous month’s reading.
But at the same time, the survey found expectations for bigger purchases (namely homes and autos) are up on a six-month rolling average, seemingly demonstrating that demand for homes is defying broader pessimism about the economy.
The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 3.6 points to 114.9, its third consecutive monthly decline. The Expectations Index—based on consumers’ short-term outlook for income, business and labor market conditions—remained unchanged at 74.7. The survey period for this month’s preliminary results was July 1-22, encompassing ongoing conflict in the Middle East.
“Consumer confidence moderated slightly in July, continuing a general downward sloping trajectory since late 2021,” said Dana M Peterson, chief economist at The Conference Board. “The Present Situation Index was less positive for a third consecutive month while the Expectations Index remained in negative territory. Consumer appraisals of current business conditions and, to a lesser extent, perceptions of the current labor market both softened.”
On LinkedIn, Thomas J. Thompson, chief economist at Havas Edge, a multinational public relations firm, said the war is not the only concern weighing on consumers right now.
“One detail worth noting is the timing of the survey. Responses were collected between July 1 and July 22, encompassing the ongoing conflict in the Middle East. The Conference Board noted that references to war and geopolitics eased during most of the survey period, while mentions of jobs and unemployment increased, reinforcing that labor market concerns remain top of mind for many households.
“Consumer confidence is one of my favorite reports each month because it’s less about what happened and more about what consumers think will happen next,” he continued. “Consumers rarely change their behavior all at once. Their outlook usually shifts first, and those changes often show up here before they’re reflected in spending, employment or other economic data.”
Thompson noted that what stood out to him was that the report didn’t describe a consumer who is pulling back across the board.
“Instead, it describes a consumer who is becoming more selective,” he wrote. “Households remain cautious about the economy and labor market, yet many continue planning vacations, dining out, and major purchases. One of the defining characteristics of this economy may be that consumers remain willing to spend, but they’re becoming increasingly selective about where and why they do it.”
The Consumer Confidence Survey reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes, buying intentions, vacation plans and consumer expectations for inflation, stock prices and interest rates. Data are available by age, income, nine regions and top eight states.
