US consumer confidence fell to its lowest level in nearly a year and a half, in July, amid persistent concerns regarding rising inflation and interest rates.
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Consumers ‘sharply reassessed their spending plans this month’
US consumer confidence fell to its lowest level in nearly a year and a half, in July, amid persistent concerns that higher inflation and interest rates, which might undermine spending and point to slowing economic growth at the start of the third quarter.
And a survey conducted by the Conference Board, today, Tuesday, showed that consumers “sharply reassessed their spending plans this month,” and that “people surveyed plan to purchase major appliances such as refrigerators and washing machines within the next six months,” indicating that these plans are the lowest since late 2017. 2010.
This, along with other data showing new home sales in June falling to their lowest level in more than two years, painted a picture of an economy in recession.
Economic activity has slowed as the Federal Reserve (the US central bank) tightens monetary policy, in order to curb inflation, and the central bank is expected to raise the interest rate by another 75 basis points tomorrow, Wednesday, which will bring the total of interest rate hikes since March to 225 basis points.
“Low consumer confidence means the economy isn’t on a solid footing,” said Jeffrey Roach, chief economist at LBL Financial in Charlotte, North Carolina.
The Conference Board’s index of consumer confidence fell 2.7 points to 95.7 this month, the lowest level since February 2021, and the third consecutive monthly decline.
Economists had expected the index to drop to 97.2, according to Archyde.com.
Housing prices soaring
This month, consumers also showed less inclination to buy homes, as higher mortgage rates eroded affordability, indicating further declines in home sales.
A separate report from the Commerce Department showed that new home sales “fell 8.1% to a seasonally adjusted annual rate of 590,000 units last month, the lowest level since April 2020”.
Although demand is slowing, a collapse in the housing market is unlikely, while an acute shortage of homes is driving up prices.
However, the pace of price increases is slowing. A third report released on Tuesday showed that the Standard & Poor’s CoreLogic Case-Shiller home price index rose 19.7% year-on-year in May, following rising 20.6% in April.
Continued strong home price inflation was supported by the fourth report from the Federal Housing Finance Agency, which showed housing prices rose 18.3% in the 12 months through May, following accelerating 18.9% in April.
