US consumer confidence drops sharply in July on worries about job market, turmoil overseas

WASHINGTON – U.S. consumer confidence fell this month to the lowest level since September. Consumers are worried about the job market and rattled by events in Greece and China.

The Conference Board said Tuesday that its index of consumer confidence fell to 90.9 in July from a revised 99.8 in June. That’s the lowest since September’s reading of 89.

Consumers’ assessment of current conditions fell slightly to a still-healthy 107.4 from 110.3 in June; but their outlook for the next six months dropped sharply to 79.9 this month, the lowest since February 2014 and down from 92.8 in June.

Lynn Franco, a Conference Board economist, says consumers may have been concerned about the debt standoff in Greece and a stock market plunge in China.

The percentage of consumers describing current business conditions as “good” slipped to 24.2 per cent from 26.1 per cent in June.

The percentage expecting the job market to improve over the next six months dropped to 13.1 per cent from 17.1 per cent in June; the percentage expecting fewer jobs in six months rose to 20 per cent from 15.2 per cent.

Consumers were also slightly less likely to expect their incomes to grow in the next few months and more likely to expect them to fall.

Adam Collins, an economist with Capital Economics, said the dip in confidence also reflects higher gasoline prices in recent months; prices hit bottom at $2.03 a gallon in late January and have since rebounded to $2.70 a gallon, according to AAA. Consumer caution may reduce spending to an annual growth rate of 2 per cent in the July-September period from the 2.7 per cent forecast for the April-June period, Collins said in a research note.

He predicted their mood will improve. “With the labour market likely to strengthen further, wage growth poised to accelerate and the recent fall in oil prices suggesting gasoline prices may start to decline again,” he wrote, “confidence should rebound soon.” He expects consumption growth should then rise back toward 3 per cent.

Still, Mark Vitner, senior economist at Wells Fargo Securities, worries that consumers’ darkening mood reflects bigger problems. A strong dollar has made U.S. products less competitive in foreign markets, hurting American manufacturers. And weakening global economic growth has pushed down commodity prices and hurt mining and energy firms.

“The slide likely reflects the pressure that weaker global economic growth and the stronger dollar are exerting on parts of the country tied to energy production, mining and agriculture,” Vitner wrote in a research report.

The government will report Thursday on gross domestic product during the April-June quarter. The economy contracted 0.2 per cent during the first three months of the year, pummeled by winter weather and global economic pressures that caused the dollar to rise in value and hurt the affordability of U.S. made goods abroad.

Economists say that the economy likely returned to growth in the second-quarter, expanding at a 2.7 per cent annualized pace.

A separate survey of consumer sentiment compiled by the University of Michigan that was released this month showed a preliminary decline in sentiment from June to July.