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Consumer confidence declines in late July as coronavirus cases increase and federal aid expires

The numbers: Americans became more concerned about the economy in late July after a new outbreak of coronavirus cases that broke off during the recovery and cast doubt on how quickly the US will recover from the worst healthcare crisis in a century.

The last reading of the consumer confidence survey in July fell from 72.9 to 72.5, the University of Michigan said Friday. The index was 73.2 in June.

Sentiment levels are now barely above the lowest level of the pandemic, wiping out most of the momentum gained in late May and June when large parts of the economy reopened.

Read:Consumer confidence declines in July and indicates a stronger economic recovery

What happened: Consumers expressed less confidence in the current state of the economy. An index that measures attitudes fell from 87.1 to 82.8

Americans also doubt whether the recession will end anytime soon. An index measuring expectations for the next six months fell from 72.3 to 65.9, corresponding to a six-year low in May.

Read:The US entered a recession in February after the end of the longest expansion in history

Richard Curtin, the chief economist for the sentiment survey, said that massive federal aid has prevented the US from plunging into an even deeper recession, but he feared the economy could suffer another dip unless Washington offers more financial aid.

The two parties are stuck in another aid package with unemployment and other benefits that are about to expire.

Read: Capitol Hill speaks of the next COVID-19 financial aid bill that has remained in neutral

“The federal aid programs have prevented substantial declines in consumer finances, partially protecting consumers from the unprecedented increases in job losses, shorter working hours and pay cuts,” Curtin said. “Expiration of special unemployment benefits will directly harm the most vulnerable and spread even further through missed rents, mortgages and other debts.”

Read: Economy suffered a massive dip of 32.9% in the second quarter, indicating a long-term recovery

Also:“A Huge Prosperity Economy” – Federal Aid prevents an even further collapse of GDP

The big picture: The amount of confidence Americans have in the economy and their own financial security has a good track record in predicting the future. Confidence has declined following the recent coronavirus outbreak and the reintroduction of government restrictions.

High unemployment is another concern, especially with federal emergency unemployment benefits about to expire.

The economy cannot make significant progress in recovering without more government support and more success in controlling the coronavirus, analysts say.

Read:Unemployment claims are rising for the second consecutive week as economic activity in the US slows

What do they say? “Disappointing, but not really a surprise,” said Raymond James chief economist Scott Brown.

Market response: The Dow Jones Industrial Average DJIA,
-0.68%
and S&P 500 SPX,
-0.39%
little had changed in Friday trading. Shares have become blurred last week.

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