Consumer confidence in the United States continued its negative spiral in July for the third consecutive month, amid lingering fears of recession, according to the Conference Board index released on Tuesday. The index now stands at 95.7 points, a drop of 2.7 points compared to June, the data for which was also revised downwards (98.4 points against 98.7 previously announced).
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The decrease is mainly explained by a decline in the component measuring the perception that consumers have of the current economic situation, “a sign that growth slowed at the start of the third quartercommented Lynn Franco, senior director of economic indicators at the Conference Board, quoted in a press release. This component of the index rose to 141.3 points against 147.2 the previous month. The future economic situation index was relatively stable (at 65.3 points against 65.8 in June) but remains at a low level, “suggesting that recession risks persist“, according to Lynn Franco. When households expect prices to continue to rise, they consume even less, which risks aggravating a recession, while consumption is the locomotive of the American economy, representing almost three quarters of GDP.
“As the Fed hikes interest rates to counter inflation, buying intentions for cars, homes, and major appliances all contracted further in July“, she continues. The American central bank, the Fed, still hopes to be able to slow inflation without causing a recession, and should proceed on Wednesday to a fourth increase in its key rates. “Looking ahead, inflation and further interest rate hikes are likely to continue to pose strong headwinds to consumer spending and economic growth over the next six months.“says Lynn Franco.
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