Americans became less confident about the economy in July as views of current business conditions and job availability weakened, The Conference Board reported Tuesday.
Its Consumer Confidence Index declined 1.4 points to 90.8 from an upwardly revised 92.2 in June. More concerning was the Present Situation Index, which fell for a third consecutive month as households became less positive about the economy they are experiencing now.
The Expectations Index remained unchanged at 74.7. Readings below 80 have historically been associated with an increased risk of recession, although the indicator does not mean a downturn is certain.
For consumers, the report describes an economy where people are still planning vacations, restaurant meals and major purchases while becoming less comfortable about employment, income and everyday costs.
Only 18.9% of respondents described current business conditions as good, down from 20.2% in June. Those calling conditions bad increased to 17.8% from 16.5%.
Views of the job market also weakened.
The share saying employment was plentiful fell to 24.6% from 25.5%. Another 21.5% described jobs as hard to get, little changed from June but still high enough to show that workers no longer view hiring conditions as especially favorable.
That distinction matters even for people who currently have jobs. When fewer openings appear available, employees may become less willing to change companies, negotiate higher pay or leave an unsatisfactory position without another offer secured.
Households also tend to become more cautious about large purchases when they worry that replacing lost income could take longer.
The survey shows caution—not a complete retreat by the American consumer.
Homebuying and vehicle-purchasing expectations continued improving when measured across a six-month average. Consumers also expressed interest in furniture, smartphones, televisions, refrigerators and washing machines.
Plans for service spending increased as well.
Restaurants, takeout, streaming, mobile services, beauty and personal care remained among the most popular categories. Respondents also anticipated spending more on movies, hotels, airfare, amusement parks, museums and historical attractions.
Domestic travel intentions recovered after weakening during much of the year, while plans for international travel softened slightly.
The split creates an important challenge for retailers and service businesses.
Customers have not stopped spending, but they may become more selective. Restaurants, hotels and stores could continue seeing demand while facing greater resistance to price increases and stronger competition for each discretionary dollar.
Food and grocery costs remain particularly visible.
Written survey responses included more references to grocery prices during July. Although mentions of inflation and gasoline became somewhat less frequent during the July 1–22 survey period, both remained elevated.
Renewed fighting in the Middle East and the latest increase in oil prices occurred too late to be fully reflected in the preliminary survey. The Conference Board said geopolitical concerns could appear more prominently when July’s figures are revised.
That timing means consumers were already becoming less confident before the latest energy-price shock.
A sustained rise in gasoline could further strain sentiment because fuel costs are displayed prominently and paid repeatedly. Higher transportation expenses can also reach households through airfare, deliveries and the cost of goods moved by truck.
Interest rates remain another concern.
Nearly two-thirds of consumers—61.3%—expected borrowing costs to rise during the next 12 months, unchanged from June. That expectation was recorded before Wednesday’s Federal Reserve meeting produced three dissenting votes in favor of an immediate rate increase.
Households therefore appear to be planning purchases while assuming that financing may not become cheaper soon.
Income expectations remained positive overall but weakened slightly. Some 20.3% expected their incomes to increase, down from 20.7% in June, while 13% anticipated a decline.
Outlooks for future business conditions deteriorated more noticeably. Only 17.8% expected conditions to improve during the next six months, while 21.1% believed they would worsen.
The labor outlook was somewhat less negative. More respondents expected employment availability to improve than in June, and the share expecting fewer jobs declined slightly.
Confidence also varied by household.
Younger adults remained more optimistic on a six-month average, while higher-income groups generally expressed greater confidence than those with fewer financial resources. Older consumers recorded some of the largest declines.
That gap can shape where spending remains strongest. Higher-income families may continue traveling, dining out and purchasing services even as lower- and middle-income households cut back because of groceries, rent, insurance and borrowing costs.
For businesses, the report argues against assuming that continued consumer spending means households feel financially secure.
People can keep spending temporarily by reducing savings, using credit or prioritizing certain experiences while delaying other purchases. Confidence data cannot determine which method consumers are using, but it can identify growing hesitation before it becomes visible in retail receipts.
July’s results do not show Americans preparing for an immediate economic collapse. Family assessments of current finances improved after three months of deterioration, and relatively few respondents considered a recession very likely.
Still, the combination of weaker job perceptions, softer business conditions and expectations for higher interest rates creates a more fragile consumer environment.
The next confidence report is scheduled for August 25. By then, households will have absorbed additional information about fuel prices, inflation, interest rates and summer hiring.
Whether spending plans survive that pressure will determine if July’s decline was ordinary caution—or an early warning that American consumers are beginning to pull back.
JBizNews Desk | New York
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