Consumers are torn between a range of factors when considering the economic outlook, feeling relatively confident about the job market but remaining deeply concerned about rising prices.
Confidence grows gradually
The Conference Board’s Consumer Confidence Index rose slightly in July, signaling mixed sentiment among U.S. consumers. The index rose to 100.3 from a revised 97.8 in June. But the increase masks underlying concerns. The Current Situation Index, which assesses current business and labor market conditions, fell to 133.6 from 135.3, indicating that consumers perceive current economic conditions as slightly worse.
Meanwhile, the expectations index, which reflects consumers’ near-term outlook for income, business and labor market conditions, rose to 78.2 from 72.8 in June, still below the 80-point level often seen as an indicator of an economic recession.
Dana M. Peterson, chief economist at the Conference Board, stressed that while confidence has improved, it remains within the narrow range observed over the past two years.
“While consumers are relatively optimistic about the labor market, they still appear to be concerned about rising prices and interest rates and uncertainty about the future, things that may not improve until next year,” Peterson said.
Confidence increased among younger consumers under 35 and those over 55 in July, while confidence declined among those in the 35-54 age group. No clear trends emerged among income groups, but those earning over $100,000 continued to have the highest confidence based on a six-month rolling average, narrowing the gap with other income groups.
Consumers are somewhat pessimistic about the current labor market, with fewer respondents believing jobs are plentiful and more believing it is difficult to get a job. The short-term business environment is viewed more optimistically, with more expecting it to improve and fewer expecting the situation to worsen.
Inflation expectations over the next 12 months are stable at 5.4%, while expectations of rising interest rates have fallen to 50.3%. Optimism about the stock market in particular is on the rise, with almost half of respondents expecting stock prices to rise.
Consumers reported cutting back on spending on discretionary services such as gambling and personal travel, and favoring cheaper options such as streaming over movie nights. Despite these cuts, non-discretionary spending such as health care and car services remained a priority.
This month’s survey highlights consumers’ cautious optimism, tempered by continuing economic challenges and uncertainty.
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In contrast, data from the University of Michigan’s Consumer Sentiment Index shows a decline: The survey showed a 2.6% month-on-month decline in July and a 7.1% decline from a year ago, while the Consumer Expectations Index was down 1.1% month-on-month but up slightly year-on-year, at 0.7%.
“Consumer sentiment has remained little changed over the past three months, with July’s reading being 1.8 percentage points lower than June, which was not statistically significant and was within the margin of error,” commented Joanne Hsu, director of consumer research at the university. “Consumer sentiment has risen 33% since its all-time low in June 2022, but caution remains as high prices continue to weigh on consumer sentiment, especially for lower-income earners.”
Minimum requirements
In fact, low-income consumers are seeing a large portion of their income disappear to meet basic needs: According to a PYMNTS Intelligence study, consumers earning less than $50,000 per year spend 72% of their income each month on food, monthly bills and housing, with the majority of that going to housing.
Additionally, this month’s PYMNTS Intelligence survey, “New Reality Check: Living Before Payday Report,” found that nearly two-thirds of consumers are struggling to get by before payday, and nearly one in four consumers are having trouble making their monthly payments.
Read more: Consumer Insights, Consumer Sentiment Index, Consumer Sentiment, Economy, Consumer Sentiment Index, Inflation, Job Market, Jobs, Labor Market, News, Paycheck to Paycheck, PYMNTS News
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