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Consumer Confidence Falls Again in July for Third Month in a Row

U.S. News & World Report logo U.S. News & World Report 7/26/2022 Tim Smart
HOUSTON, TEXAS - JULY 15: A customer shops in a Kroger grocery store on July 15, 2022 in Houston, Texas. U.S. retail sales rose 1.0% in June according to the Commerce Department, with consumers spending more across a range of goods including gasoline, groceries, and furniture. (Photo by Brandon Bell/Getty Images) © (Brandon Bell/Getty Images) HOUSTON, TEXAS - JULY 15: A customer shops in a Kroger grocery store on July 15, 2022 in Houston, Texas. U.S. retail sales rose 1.0% in June according to the Commerce Department, with consumers spending more across a range of goods including gasoline, groceries, and furniture. (Photo by Brandon Bell/Getty Images)

The confidence of consumers continued its downward slide in July, indicating fears of a slowing economy entering the second half of the year, the Conference Board reported on Tuesday.

After posting its lowest reading in a decade in June, the consumer confidence index slipped further to 95.7 from last month’s 98.4, which was revised lower.

The decline came as consumers grew more pessimistic about current conditions.

The present situation index – measuring consumers’ assessment of current business and labor market conditions – fell to 141.3 from 147.2 last month. The forward-looking expectations index dropped slightly to 65.3 from 65.8.

“Consumer confidence fell for a third consecutive month in July,” said Lynn Franco, senior director of economic indicators at the board. “The decrease was driven primarily by a decline in the present situation Index – a sign growth has slowed at the start of Q3.”

“The expectations index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist,” Franco added. “Concerns about inflation – rising gas and food prices, in particular – continued to weigh on consumers.”

The survey showed consumers reducing their interest in buying cars, homes and major appliances, likely dampening consumer spending for the remainder of the year.

The mood of consumers will be on the minds of members of the Federal Reserve’s monetary policy committee as it begins a two-day meeting amid expectations it will raise interest rates on Wednesday by 75 basis points. With some key sectors of the economy such as housing already slowing from the twin headwinds of higher borrowing costs and inflation, analysts will watch to see what the Fed says about its future plans for rate hikes. 


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A second reading on consumer sentiment comes on Friday from the University of Michigan along with a report on inflation that the Fed is known to favor over the more common consumer price index, now showing inflation running at an annual rate of 9.1%. The core personal consumption expenditures index, stripping out often volatile food and energy prices, is a gauge the Fed follows closely and it is expected to remain at its current annualized level of 4.7% after falling slightly in June.

The Fed raised interest rates by 75 basis points in June in the sharpest move in two decades, jolting the markets, and now is fully committed to the fight against inflation. But economists fear that as the Fed plays catchup, it will be hard to avoid a recession. The government will report on gross domestic product for the second quarter on Thursday; the first quarter was negative with a 1.6% decline in output.

“Further sharp tightening is still to come, with the Fed compelled to respond forcefully to stubbornly high headline inflation and climbing inflation expectations, if energy prices rise further,” said Seema Shah, chief global strategist at Principal Global Investors.. “Expect policy rates to rise to 3.5% this year and then to 4.25% next year.”

On Tuesday, the International Monetary Fund lowered its projections for global growth this year to 3.2%, down from 3.6% in April. The organization trimmed its 2023 forecast to 2.9%, down from 3.6% previously.

“Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide – especially in the United States and major European economies – triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine,” the IMF said.

The combination of inflation and rising interest rates drove the Peter G. Peterson Foundation’s fiscal confidence index to a new low of 37, the lowest in its 10-year history.

The latest survey, released Tuesday, measures concern over the national debt, with confidence falling as economic uncertainty increases.

Some 79% of those surveyed think Congress should do more to address the debt, a number that is 14 points higher than a year ago.

Nearly three-quarters of voters, 73%, say the debt should be a top priority for leaders, including 62% of Democrats, 75% of independents, and 85% of Republicans, according to the survey.

Separately, new home sales fell 8.1% in June from May’s 642,000 level–which was revised sharply downward from the prior estimate of 696,000. New home sales are down 17.4% from a year ago.

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