US Consumer Confidence Rises in July but Concerns Over Inflation Won’t Budge: Survey

U.S. dollar banknotes in an illustration, on May 3, 2018. (Dado Ruvic/Reuters)

U.S. consumers felt more confident in July, with expectations over the near-term future unexpectedly rebounding, although lingering concerns over inflation and increased borrowing costs remain, according to a new survey by The Conference Board.

The business research group said its consumer confidence index—which measures how optimistic or pessimistic U.S. consumers are about current and future economic conditions—rose to 100.3 in July from a downwardly revised 97.8 in June.

Economists polled by Reuters had forecast the index falling to 99.7 from the previously reported 100.4.

Elsewhere, the measure of Americans’ short-term (the next six months) expectations for income, business, and job market conditions improved in July to 78.2, according to the survey.

That is up from 72.8 in June but still below 80. A reading below 80 can signal that a potential recession is ahead, The Conference Board said.

The share of consumers expecting higher interest rates over the next 12 months also dropped for the second month in a row to 50.3 percent, the lowest since February.

The Federal Reserve, which has raised its benchmark interest rate to a 23-year high as part of efforts to cool down inflation, is set to wrap up its current two-day meeting on July 31. Most analysts expect no change to interest rates.

While there was some increased optimism among consumers, the present situation index—which is based on U.S. consumers’ assessment of current business and labor market conditions—declined to 133.6 in July from 135.3 in June, the survey showed.

Concerns Over High Prices, Interest Rates

Elsewhere, the number of respondents who said they planned to buy a car remained unchanged month on month, while buying plans for most big-ticket appliances increased only slightly, the business group said.

Consumers’ average 12-month inflation expectations held steady at 5.4 percent in July, compared to a peak of 7.9 percent in 2022, although the number of respondents predicting a U.S. recession over the next 12 months inched up this month, according to The Conference Board. Still, it remains well below its 2023 peak.

According to The Conference Board, July’s survey results show that elevated prices—particularly for food and groceries—and inflation were top factors affecting consumers’ views of the economy.

That was followed by the current political situation in the United States as it gears up for the November elections.

However, The Conference Board noted that the share of respondents who believe the 2024 election will affect the economy is still lower when compared to its July survey before the 2016 elections.

The labor market was another factor affecting respondents’ economic views in July, the business group said.

“Confidence increased in July, but not enough to break free of the narrow range that has prevailed over the past two years,” The Conference Board’s chief economist, Dana M. Peterson, said. “Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates, and uncertainty about the future; things that may not improve until next year.”

Peterson added that potentially, smaller monthly job additions are weighing on consumers’ assessment of current job availability.

“While still quite strong, consumers’ assessment of the current labor market situation declined to its lowest level since March 2021,” she said.

Meanwhile, U.S. job openings remained unchanged from May at 8.2 million in June, according to the Labor Department, and both the number of hires and total separations remained little changed in June at 5.3 million and 5.1 million, respectively.

The Labor Department is set to release July numbers on job creation and unemployment on Aug. 2.

Reuters and The Associated Press contributed to this report.