U.S. consumer confidence fell this month to the lowest level recorded since September.
The Conference Board says its index of consumer confidence fell to 90.9 in July from a revised 99.8 in June.
Consumers’ assessment of current conditions also fell slightly to 107.4, down from 110.3 in June. And, their collective outlook for the next six months dropped sharply to 79.9 this month—that’s the lowest reading since February 2014, and compares to 92.8 in June.
Lynn Franco, a Conference Board economist, says consumers may be concerned about the debt standoff in Greece, and about a potential stock market plunge in China.
As such, the percentage of consumers describing current business conditions as being good slipped from 26.1% in June to 24.2%. The percentage expecting the job market to improve over the next six months also dropped, down to 13.1% from 17.1% in June.
Plus, most consumers don’t expect their incomes to grow in the next few months.
Adam Collins, an economist with Capital Economics, says the dip in confidence also reflects higher gasoline prices in recent months—prices hit bottom at $2.03 a gallon in late January, but have since rebounded to $2.70 a gallon, according to AAA.
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However, he predicts people’s moods will improve due to three factors. Those are:
- a strengthening labour market;
- potentially accelerating wage growth; and
- the recent fall in oil prices, which suggests gasoline prices may start to decline again.
As a result, he adds, consumption growth may rise back toward 3%.
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, and that’s 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 recent research report.
The government will report on GDP on July 30th for the April-June quarter. Already, the economy contracted 0.2% during the first three months of the year, pummelled 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% annualized pace.
A separate survey of consumer sentiment compiled by the University of Michigan that was released this month shows a preliminary decline in sentiment from June to July.