Consumer Confidence Stable at 61.8 in July Inflation Expectations Drop to 4.4%

U.S. consumer confidence in July showed minimal change compared to June, with a slight increase of about 1 point to 61.8. This marks a five-month high for the index, although it remains approximately 16% lower than in December 2024 and below historical averages. The stability in consumer confidence suggests that recent policy changes, including tax and spending bills, have had little impact on consumer sentiment.

Inflation expectations for the next year declined for the second consecutive month, dropping from 5.0% to 4.4%. Long-term inflation expectations also fell for the third consecutive month, from 4.0% in June to 3.6% in July. These indices are at their lowest levels since February 2025 but remain above December 2024 levels, indicating that consumers still perceive a significant risk of future inflation increases.

The downward trend in inflation expectations reflects a broader pattern of declining inflation since its peak in mid-2022. However, the path to price stability remains uneven, with businesses exercising caution due to elevated uncertainty. This has contributed to a slight softening in non-auto consumer spending across most regions. Despite this, American consumers have shown resilience, with retail sales growth in June defying expectations. This growth is attributed to a 'wait-and-see' attitude among shoppers, who are navigating economic uncertainty and potential tariff threats.

Analysts have noted that while consumer inflation accelerated to 2.7% year-over-year from 2.4% a month earlier, the overall trend suggests a moderation in inflation. This moderation, coupled with stability in the job market, is expected to provide a more stable footing for consumer confidence. However, weak consumer confidence remains a concern, and retail sales may soften in the coming months. The 5–10-year inflation outlook is projected to tick down to 3.9% from 4.0%, indicating a gradual return to price stability.

Policymakers are closely monitoring these developments, as the path to price stability continues to be uneven. Unless consumers are convinced that inflation is unlikely to worsen, such as through stabilizing trade policies in the foreseeable future, they are unlikely to regain confidence in the economy. The current survey results show little impact on consumer confidence from other policy changes, indicating that more significant shifts in economic conditions or policy directions may be needed to boost consumer sentiment.