US consumer confidence drops in July on labor market outlook

The Conference Board's index of consumer confidence fell much more sharply than expected in July, coming in at 90.9 (forecast/consensus: 100.0) from a downwardly revised June reading of 99.8 (initial: 101.4). The July drop was driven primarily by a decline in consumer expectations. This portion of the index fell to 79.9 (previous: 92.8), the weakest reading since February 2014. The present situation component fell more modestly to 107.4 (previous: 110.3) and remains above its May level. Labor market sentiment declined across the survey, with forward expectations falling more than the current situation.

"The labor market differential, which measures the share of consumers who thoughts jobs were plentiful less those who thought they were hard to get, fell modestly to -6.0 (previous: -4.8). Expectations for job gains fell more sharply to a net -6.9 with just 13.1% expecting more jobs (previous: 17.1) and 20% expecting fewer (previous: 15.2%). Elsewhere in the details of the survey indicators of purchasing sentiment were mixed. Automobile purchase plans declined to 10.8 (previous: 13.1), but home buying sentiment rose (5.9, previous: 5.6) and major appliance purchases (52.2, previous: 47.4) rose to the strongest level since July 2010", says Barclays.

Compositionally the decline was more pronounced in younger households and those earning less than $50k. Overall, risks to the labor market outlook implied by this morning's report bear watching. The survey commentary suggests international risks from China and Greece have bled into domestic sentiment. While one report does not change our expectation of solid consumer activity, the fact that the weakness was concentrated in the labor market outlook modestly increases downside risks around our baseline outlook for the US economy.