US Consumer Confidence Dips in July Amid Price and Labor Concerns

U.S. consumer confidence experienced a slight decline in July, continuing a downward trend observed since late 2021. The Conference Board's Consumer Confidence Index fell to 90.8 in July, down from an upwardly revised 92.2 in June. This decrease was primarily driven by growing concerns over the rising cost of groceries and the state of the labor market.

Present Situation Worsens, Expectations Remain Low

The Present Situation Index, which gauges consumers' perceptions of current business and labor market conditions, dropped for the third consecutive month, reaching 114.9 in July from 118.5 in June. Both views on current business and labor conditions softened during the month.

Dana M. Peterson, chief economist at The Conference Board, noted that consumer confidence moderated slightly in July. The survey, conducted from July 1–22, also encompassed the ongoing conflict in the Middle East. While mentions of war and geopolitics eased during the survey period, the acceleration of the conflict could lead to an increase in these concerns in revised data.

The Expectations Index, which measures consumers' short-term outlook on income, business, and labor market conditions, remained unchanged at 74.7. This marks the 18th consecutive month where the index has stayed below the 80 threshold, a level historically associated with a forthcoming recession. Consumers anticipate little improvement in business conditions over the next six months, although their outlook on the labor market saw a slight, albeit still negative, improvement.

Consumer Concerns and Spending Plans

Write-in responses from consumers indicated persistent pessimism regarding the economy, with elevated references to prices, particularly for food and groceries, as well as jobs and unemployment. While mentions of war and geopolitics eased, concerns about inflation remain a significant factor.

Most consumers (61 percent) anticipate higher interest rates over the next 12 months. Despite these concerns, consumers' views on their family's current financial situation improved slightly after three months of decline, though future financial outlooks were less optimistic.

Regarding spending plans for the next six months, furniture and smartphones were the most popular durable goods. Plans to purchase TVs, refrigerators, and washing machines also saw an increase. Consumer plans to buy a home or a car continued to trend upward.

In the services sector, consumers plan to increase spending, with top categories including restaurants, bars, and takeout; streaming, internet, and mobile services; and beauty and personal care. Spending on activities such as travel, including hotels and airfare, also picked up in July after a subdued period, with domestic travel plans recovering.

Demographic Trends in Confidence

Confidence levels varied across different demographic groups. Consumers under the age of 35 continued to exhibit the highest confidence. Those aged 35-54 saw the most significant improvement in confidence. By income, higher-income groups generally remained more optimistic, while confidence levels were mixed overall.

Generationally, Gen Z and Millennials maintained the highest confidence levels. The Silent Generation experienced the most notable decline in confidence. Politically, confidence among Democrats and Independents softened, while Republicans expressed slightly more positive sentiment.

The next release of the Consumer Confidence survey results is scheduled for August 25.