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Americans’ feelings about the economy remained pessimistic in July, dropping further after a sharp decline the month before amid concerns over skyrocketing inflation and a potential recession, according to a survey released Tuesday. headline news
Amid the fastest increase in US consumer prices in more than four decades, made worse by the war in Ukraine, the consumer confidence index fell to 95.7 from 98.4 in June, according to The Conference Board’s monthly survey.
Consumers flush with savings and government aid money have been a key driver of the post-pandemic recovery of the world’s largest economy, spending freely on big-ticket purchases like homes, cars and appliances.
But supply chain snarls, made worse by Covid-19 lockdowns in China, meant demand has outstripped supply, and that dynamic has fueled a surge in prices.
The survey showed feelings about the present situation fell sharply, though expectations for income and business in the next six months only dipped slightly to 65.3 from 65.8.
Lyn Franco, the institution’s senior director of economic indicators, said inflation woes continue to drag down Americans’ perception of the economy.
“The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist,” she said in a statement.
“Concerns about inflation — rising gas and food prices, in particular — continued to weigh on consumers.”
The Federal Reserve, which has launched an aggressive cycle of interest rate increases to tamp down inflation by cooling demand, is expected to hike rates by 75 basis points for a second time at its two-day policy meeting beginning Tuesday, with more increases likely in the months ahead.
President Joe Biden said Monday he believes the US economy is on solid footing and will avoid a recession.
Lydia Boussour of Oxford Economics said weakening confidence, which reached its lowest level since February 2021, could boost the risk of a downturn.
The “increased pessimism is consistent with our view that consumer spending and the broader economy are downshifting to a much slower growth path amid high inflation, rapidly-rising interest rates, and financial market volatility,” she said.
“While we still see strong economic fundamentals preventing the US economy from slipping into recession this year, the pathway to a softish landing is narrowing.”
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