US consumer confidence falls again

The Conference Board said on July 28 that its U.S. consumer-confidence index fell to 90.8 in July from an upwardly revised 92.2 in June, extending a three-month decline in a closely watched measure of household sentiment. The group said its Present Situation Index fell 3.6 points to 114.9, its third straight monthly drop, while the Expectations Index held at 74.7. The July survey period ran from July 1 through July 22 and included the period of conflict in the Middle East, according to the Conference Board. ### If confidence fell again, what were consumers reacting to? The Conference Board said consumers’ assessments of current business and labor-market conditions softened again in July. The group said write-in responses showed inflation remained a top concern, with higher grocery and gas prices weighing on views of the economy. (conference-board.org) July’s Expectations Index stayed below 80 for an extended period, a level the Conference Board has said can signal recession risk ahead. The index was unchanged at 74.7 in July. ### How does that square with the labor market? The U.S. Bureau of Labor Statistics said on July 2 that the unemployment rate was 4.2% in June and that nonfarm payrolls rose by 57,000. (conference-board.org) The agency said employment continued to trend up in professional and business services, social assistance and health care, while leisure and hospitality lost jobs. Separate labor-market data showed job openings at about 7.4 million in June. (conference-board.org) That level pointed to some cooling in demand for workers, but it remained well above pre-pandemic norms and layoffs stayed comparatively low, according to reports on the data. ### Why are services still growing if households feel worse? (bls.gov) The Institute for Supply Management said on Aug. 5 that its Services PMI rose to 54.1 in July from 54.0 in June. A reading above 50 indicates expansion, and ISM said the services sector has now remained in growth territory for 25 straight months. ISM said business activity rose to 59.1 and new orders increased to 57.2 in July. (beijingtimes.com) At the same time, the services employment index fell to 47.4, indicating contraction in hiring within that survey even as broader labor-market measures remained relatively steady. ### What is the gap between sentiment and hard data telling economists? (ismworld.org) The July data left a familiar split: households reported weaker confidence while hiring and services activity did not point to a clear downturn. The Conference Board’s survey showed softer views of current conditions, while BLS and ISM data showed unemployment holding at 4.2% and service-sector activity still expanding. (ismworld.org) Named economists in the source material said that kind of divergence can matter if it persists because consumer spending drives most U.S. economic activity. For now, the published data show caution in sentiment rather than a collapse in labor demand or services output. ### What comes next that could confirm or challenge this picture? (conference-board.org) Friday’s July employment report is the next major test of whether weakening confidence is spilling into hiring. Reports on the labor data said forecasters expected payroll gains of about 100,000 and the unemployment rate to hold at 4.2%. Later readings from the Conference Board and the Institute for Supply Management will show whether August brings another drop in household sentiment or another month of services expansion. (conference-board.org) (abcnews.com)