U.S. consumer confidence tumbled in July to a reading of 92.6 as coronavirus infections spread in many parts of the country.
The Conference Board, a New York research organization, reported Tuesday that its consumer confidence index fell from a June reading of 98.3. The weakness came from a drop in the expectations index, which measures consumer views about the short-term outlook for income, business and labour market conditions.
The consumer confidence index is closely watched for signals it can send about future consumer spending, which accounts for 70% of economic activity.
Katherine Judge, economist at CIBC Capital Markets in Toronto, said the July reading “was worse than expected, but leaves the series above the low of 85.7 hit in April at the height of the lockdown.”
The Conference Board said that the large decline in the expectations index reflected big drops in sentiment in Michigan, Florida, Texas and California, all states that have seen a resurgence in coronavirus cases.
About 4.2 million confirmed Covid-19 cases have been reported in the United States, according to Johns Hopkins University, and there have been more than 146,000 deaths.
“Consumers have grown less optimistic about the short-term outlook for the economy and labour market and remain subdued about their financial prospects,” said Lynn Franco, senior director of economic indicators at the Conference Board.
“Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending,” Franco said.
“Spending intentions were mixed, as they rose for homes but fell slightly for both autos and major appliances,” Judge said. “We still expect July to show a deceleration in hiring. This data suggests that the recovery has shifted into a lower gear, as consumers became more cautious about the outlook as virus cases continued to escalate.”
Robert Frick, an economist at Navy Federal Credit Union, said the big drop in consumer expectations could reflect the fact that many Americans see a fiscal cliff looming.
“More consumers see drops in business conditions and more see fewer jobs ahead,” he said. “The jobs market is slowing, and may be stalling due to the rise in Covid-19 infections and bankruptcies.”
The overall index stood at a high for this year of 132.6 in February before the pandemic forced shutdowns across the country in March and April.