US consumer confidence fell in July, with the Conference Board's gauge decreasing by 1.4 points to 90.8, following an upward revision for the previous month. This figure was below the median economist estimate of 92.4 in a Bloomberg survey. The decline was primarily attributed to Americans' deteriorating outlook on current business conditions and the labor market. This shift in sentiment is a concern given that consumer spending drives nearly 70% of the US GDP.
This drop in consumer confidence aligns with other recent economic indicators suggesting a weakening economy. Retail sales also declined by 0.6% in July, marking the steepest drop since May 2025. The University of Michigan's survey showed a 7.6% month-to-month decline in consumer sentiment, with a significant portion of this decline stemming from pessimistic expectations for business conditions. Year-ahead inflation expectations also edged up from 4.2% in June to 4.3% in July.
Analysts are closely watching these trends. Chris Zaccarelli, chief investment officer at Northlight Asset Management, highlighted the economy's reliance on consumer spending, warning that a prolonged slowdown could negatively impact corporate profits and the stock market. However, he also noted that such data might encourage the Federal Reserve to hold off on interest rate hikes, which could be beneficial for the bull market by allowing inflation to cool. Financial markets have already shifted their expectations, with nearly 70% now forecasting no change in rates next month.
The decline in retail sales saw varied performance across sectors. While gas station spending decreased due to lower prices, electronics and appliance sales dropped by 0.5%, and e-commerce sales fell by 2.2%. A bright spot was a 0.5% increase in food service and drinking place sales, potentially boosted by the World Cup, though this could soften in August. Overall, these reports signal potential fatigue among American consumers, putting pressure on economic growth.
