Consumer Confidence Falls for Third Consecutive Month as Recession Fears Mount
U.S. consumer confidence declined in July for the third consecutive month, dropping 2.7 points since June and reaching the lowest level recorded since February 2021.
The Conference Board Consumer Price Index, which reflects consumer’s business expectations for future months, stands at 95.7 points, down from last month’s 98.4.
The Present Situation Index, showing the current business expectations of consumers, fell to 141.3 from 147.2 in June. The Expectations Index, which predicts the shot term business expectations, also fell, going down to 65.3 compared to 65.8 last month.
“The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement.
“As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July. Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months,” Franco concluded.
Top businessmen and analysts across the country including Tesla CEO Elon Musk have warned the U.S. economy is barreling into a recession, while the Biden administration has tried to mitigate fears.
“A recession is inevitable at some point. As to whether there is a recession in the near term, that is more likely than not,” Musk said in an interview with Bloomberg in June. The richest man in the world had previously told Tesla executives he had a “super bad feeling” about the economy and called for layoffs.
President Joe Biden told reporters on Monday that a recession is not inevitable.
“We’re not going to be in a recession, in my view,” Biden said. “The employment rate is still one of the lowest we’ve had in history. It’s in the 3.6 [percent] area. We still find ourselves, the people, investing.”
“My hope is we go from this rapid growth to a steady growth. And so, we’ll see some coming down. But I don’t think we’re going to – God willing – I don’t think we’re going to see a recession,” he added.
The White House has also taken issue with the definition of “recession,” claiming that the U.S. has not yet hit a “technical recession,” according to the definition from the National Bureau of Economic Research (NBER).
The NBER’s definition states a recession is a “significant decline in economic activity that is spread across the economy and that lasts more than a few months,” whereas the colloquial definition says a recession happens when there are two consecutive quarters of negative growth.
The U.S. Department of Commerce’s Bureau of Economic Analysis will release this quarter’s report Thursday, which will show if the economy hits two consecutive quarters of negative growth.
