U.S. consumer confidence tumbles in July as COVID-19 spreads

A sign advertises a sale at an H&M store along Lincoln Road Mall in Miami Beach in June. (AP Photo/Lynne Sladky, File

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 labor 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.

The Conference Board said that the large decline in the expectations index reflected big drops in sentiment in Michigan, Forida, 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 labor 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,” he said.

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.

Federal Reserve officials are grappling this week with the timing and scope of their next policy moves at a time when the raging viral pandemic has weakened the U.S. economy.

No major changes are likely when the Fed releases a statement Wednesday after its two-day policy meeting ends and just before Chair Jerome Powell holds a news conference. But the central bank is working toward providing more specific guidance on the conditions it would need to see before considering raising its benchmark short-term interest rate, which is now pegged near zero.

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Republished with permission from The Associated Press.