Consumer Confidence Fell In July, Present Situation Index Weakest Since February 2021

Confidence Slips Even As Layoffs Stay Low

The Conference Board's Consumer Confidence Index fell to 90.8 in July, down from an upwardly revised 92.2 in June, according to the Conference Board. That missed the 92.4 reading economists had expected.

The drop was driven mostly by one component. The Present Situation Index, which measures how Americans view current business and labor conditions, fell to 114.9. That's below the 117.5 expected and the weakest reading since February 2021, according to the Conference Board.

The Expectations Index, which tracks how people feel about the next six months, held steady at 74.7, a touch better than the 74.4 forecast. Any reading below 80 on that measure has historically signaled recession risk within a year, per the Conference Board's own methodology.

"Consumer confidence moderated slightly in July, continuing a general downward sloping trajectory since late 2021," said Dana M. Peterson, Chief Economist at the Conference Board. She said the Present Situation Index has now been "less positive for a third consecutive month," while the Expectations Index has stayed in negative territory.

Peterson said consumers grew less positive about current business conditions and, to a smaller degree, about the labor market. Looking forward, she said people expect little improvement in business conditions over the next six months, though labor market expectations were "slightly less negative."

The Jobs Data Contradiction

Jobless claims fell to their lowest level since 1969 the same week this survey came out. That's actual hard data on layoffs, not a feelings survey.

Yet the labor market differential in the Conference Board survey, the gap between consumers calling jobs "plentiful" versus "hard to get," narrowed to 3.1%, down 0.7 percentage points from June. Fewer people said jobs are plentiful. The share saying jobs are hard to get actually dipped slightly too. So the shift wasn't people suddenly panicking about job loss. It was a cooling in how abundant opportunity feels, even with claims near a 55-year low.

Low layoffs don't automatically mean a hot hiring market. If companies aren't firing but also aren't posting new openings or raising pay aggressively, workers can feel stuck even while headline unemployment stays low. The survey doesn't prove a hiring freeze, but the softening "plentiful" reading is consistent with one.

Who's Optimistic, Who Isn't

The partisan and generational splits in this data cut in a direction a lot of coverage will skip past.

By political affiliation, confidence among Independents and Democrats softened in July while Republicans grew somewhat more positive, according to the Conference Board breakdown. That's consistent with confidence data going back to January, when the political mood shifted along with the change in administration.

By generation, Gen Z and Millennials remained the most confident on a six-month moving average basis. Confidence fell the most for the Silent Generation over that same window. By age bracket, consumers under 35 stayed the most upbeat, while the 35-54 group showed the biggest improvement.

By income, the picture was mixed, but the Conference Board said higher-income groups were generally more optimistic than lower-income groups. That's a familiar pattern: inflation and borrowing costs bite harder on tighter budgets, and that shows up in sentiment surveys long before it shows up in spending data.

Inflation Expectations Eased Slightly

Consumers' average and median 12-month inflation expectations came in less elevated in July than the prior month. Still, 61.3% of consumers, unchanged from June, continued to expect higher inflation or interest rates ahead, per the Conference Board survey.

That's a majority of the country still bracing for prices or rates to climb further, even as the headline inflation expectation number ticked down. Sentiment and expectation are not the same as a forecast of what will actually happen, but it does tell you what's shaping consumer decisions on saving versus spending right now.

What This Doesn't Tell Us

Consumer confidence surveys are soft data. They measure mood, not transactions. The Conference Board itself has flagged before that its Present Situation and Expectations indexes can diverge from hard data like retail sales or GDP for extended stretches.

The open question is whether this July dip is noise or the start of something the labor market data hasn't caught up to yet. Jobless claims at a 1969 low is about as strong a real-time signal as exists that mass layoffs aren't happening. Whether that holds if consumer pessimism deepens further is the thing to watch heading into the Conference Board's next release.