US Consumer Confidence Shows Slight Recovery in July, Future Expectations Remain Weak

According to a report released by The Conference Board on July 29, US consumer confidence index rose to 97.2 in July from 95.2 in June, an increase of 2.0 points. This shows that consumer confidence has stabilized after declining since April.

The "Current Situation Index" measuring consumers' views on the economy and job market decreased by 1.5 points to 131.5, reflecting growing concerns about the job market; while the "Expectations Index" measuring consumers' expectations for their future income, business, and employment rose by 4.5 points to 74.4.

Stephanie Guichard, a senior economist at The Conference Board, noted that "consumer confidence has been stable since May and has rebounded from the sharp decline in April, but it remains significantly below last year's high point. In July, consumers' pessimistic outlook on future prospects improved, with all three expectations indices showing improvement, reflecting their more optimistic views on future business conditions, employment, and personal income."

According to the report, only 14.3% of consumers thought the current economic situation was "bad", a slight decrease from June's 15%, while 20.1% thought it was "good", down from 20.5%. For employment, only 30.2% of consumers believed there were plenty of job opportunities, slightly higher than June's 29.4%, but the proportion saying it was difficult to find a job rose to 18.9%, a new high since March 2021.

The main factor driving July's confidence recovery was the improved outlook among consumers aged 35 and above, except for those with annual incomes below $15,000. Republicans' confidence increased significantly, while Democrats and independents showed no change.

On inflation and policy expectations, Guichard noted that "tariffs remain a major concern in consumers' free-response answers", as most people worry about how they could further drive up prices. Although July's consumer 12-month average inflation expectation decreased slightly to 5.8% (from 6.9% in June), the frequency of mentions about "high prices" and "inflation" actually increased.

Meanwhile, some consumers mentioned the recent passage of the "Build Back Better" bill by the US Congress, with some praising its potential to boost economic growth and others expressing concerns that it could have negative effects. However, this bill was not a major focus for most consumers.

In financial market expectations, consumer confidence in stock prices continued to recover. In July, 47.9% of respondents expected future stock prices to rise, significantly higher than the 37.6% three months prior. Expectations for interest rate direction also changed, with only 53% expecting rates to increase, down from June's 57.1%, and 21.2% expecting rates to decrease, up from June's 18.4%.

In a special survey on interest rate direction, consumers generally believed that mortgage, auto loan, and credit card interest rates were more likely to rise, with the expectation of credit card interest rate increases being particularly pronounced.

July's consumer evaluation of household financial situation remained stable but slightly soft. Although current and future household financial situation indices are not included in the calculation of the Consumer Confidence Index, both indicators show that consumers still have some confidence in their personal economic prospects.

In terms of consumer willingness to spend, July's auto and housing plans showed a decline, but remained stable compared to June. However, service-related spending intentions continued to drop for the second consecutive month, with almost all categories affected. While dining out remains consumers' top choice for services, the intent to do so decreased significantly in July.

Travel plans showed a slight increase in intention to travel abroad, but the number of people planning domestic trips within the US decreased, indicating a decline in overall vacation intentions.