Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Consumer confidence rose in July off a downwardly revised print for June. Consumers’ take on the present situation hit a three-year low even as expectations improved. The upshot is a narrowing in the confidence gap (present situation less expectations). Sharp drops in this measure tend to be associated with downturns in the economy.
Here is Hoping These Expectations Do Not Become Reality
Consumer confidence technically rose in July, but only by virtue of a sharp downward revision that took June’s number down to its second-lowest reading of the past 18 months. Expectations were comparatively buoyant at 78.2 in July, an increase of more than five points from last month. Consumers’ assessment of the present situation wilted to 133.6, a three-year low. The upshot is a sharp downturn in the Confidence Gap, or present situation less expectations. Such downturns tend to be associated with tough times for the economy as the top chart shows.
In a recent Topic of the Week, we described how Fed policymakers are transitioning from being laser-focused on bringing down inflation to giving fuller consideration to the maximum employment portion of the mandate.