The numbers: Consumer confidence slumped in July due to a wave of new cases of coronavirus in many US states, signaling a stronger economic recovery in the coming months.
The consumer confidence index fell to 92.6 this month, after a revised 98.3 in June, the Conference Board said Tuesday. Economists surveyed by MarketWatch expected a score of 96.0.
Confidence is still above the lowest level of the pandemic of 85.7, but it will likely take a long time to return to its pre-crisis peak. The index peaked at 132.6 in February at 20.6 before the pandemic hit.
The economy is not expected to fully recover for at least a year or two.
“Consumers have become less optimistic about the short-term outlook for the economy and the labor market and remain subdued about their financial prospects,” said Lynn Franco, senior director of economic indicators at the board. “Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending.”
What happened: An index that measures how consumers feel about the economy rose from 86.7 in July to 94.2 in July. Massive federal aid and other measures to support the economy have helped prevent worse financial problems for millions of Americans who are already struggling to make ends meet. More than 30 million people receive unemployment benefits.
Still, Americans have become more pessimistic about the near future. Another measure of how Americans view the next six months – the so-called forward-looking index – dropped from 106.1 in June to a four-month low of 91.5.
Congress is considering a new bill for financial aid this week, but the outcome is unclear and it is possible that unemployment benefits will be cut. Washington has introduced up to $ 600 in additional benefits for unemployed Americans on top of what state plans pay, but the measure ends July 31.
Big picture: Hopes for a rapid economic recovery from the coronavirus have been dashed by an explosion in new cases in Texas, California, Florida and other hot spots. The economy is likely to experience regular ups and downs until the virus is brought back under control or treatment is discovered.
What do they say? “US consumers lost confidence in July amid the acceleration of new viruses,” said CIBC Economics economist Katherine Judge. “These data suggest that the recovery has shifted into a lower gear as consumers became more cautious about the outlook as virus cases continued to escalate.”
Market response: The Dow Jones Industrial Average DJIA,
and S&P 500 index SPX,
fell in Tuesday’s trading.