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Economy in Brief

U.S. Consumer Confidence Backpedals in July
by Tom Moeller  July 28, 2020

• Worries about the future emerge.

• Reading of current conditions continues to increase.

• All age groups become less confident.

Consumer confidence weakened in July, according to the Conference Board. The Index of Consumer Confidence fell 5.8% (-31.8% y/y) to a level of 92.6 from a June level of 98.3. Despite the decline, confidence was 8.1% improved versus its April low, but down roughly one-third y/y. A decline to an index level of 95.0 had been expected in the Action Economics Forecast Survey. Over the last 25 years, there has been a 58% correlation between the level of confidence and the y/y change in real consumer spending.

The index of expected business conditions in six months fell 13.8%, following an 8.7% rise in June. A greatly lessened 31.6% of respondents felt that would business conditions would improve, down from 42.5% in May. Thirty-one percent of respondents felt that there would be more jobs in six months, down from 41.2% in April. Only a steady 15.1% thought that income would increase.

The index of current conditions improved 8.7% after surging 26.8% in June. Nevertheless, it remained down 44.9% y/y. A steady 17.3% of respondents felt that business conditions were good, but a higher 39.1% felt that they were bad. Jobs were viewed as plentiful by 21.3% of respondents, half of those who felt so in June 2019. Jobs were viewed as hard to get by a greatly lessened 20.0% of respondents, down from 34.5% in April.

Expectations for the inflation rate in twelve months eased to 6.1%. It remained, however, well above the 4.4% rate expected six months ago. Interest rates were expected to move higher in twelve months by a lessened 38.1% of respondents, half of 2018's expectations. A greatly lessened 1.0% planned to buy a new home. A steady 3.9% planned to buy a new car within six months, while a greatly lessened 43.5% planned to buy a major appliance, down from February's high of 55.0%.

By age group, the index of confidence amongst those under age 35 fell a sharp 17.7% (-32.6% y/y) followed by deterioration in other age groups. For respondents aged 35-54, confidence fell 3.3% (-35.9% y/y). For those aged 55 and over, confidence weakened 3.4% (-27.7% y/y).

The Consumer Confidence data are available in Haver's CBDB database. The total indexes appear in USECON, and the market expectations are in AS1REPNA.

Conference Board (SA, % Chg.) Jul Jun May Jul Y/Y 2019 2018 2017
Consumer Confidence Index -5.8 14.4 0.2 -31.8 -1.4 8.0 20.7
   Present Situation 8.7 26.8 -6.3 -44.9 3.1 13.8 20.3
   Expectations -13.8 8.7 3.5 -18.6 -6.0 2.6 21.1
Consumer Confidence By Age Group
   Under 35 Years -17.7 32.1 -10.7 -32.6 0.3 2.7 6.4
   Aged 35-54 Years -3.3 8.1 3.3 -35.9 -1.1 7.0 16.4
   Over 55 Years -3.4 14.5 2.5 -27.7 -1.9 11.8 33.5
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