The Consumer Confidence Index fell to 76.6 in July from 83.5 in June, reflecting consumers’ increasing pessimism about job market growth, according to the latest survey by the New York-based Conference Board. The latest numbers mark the lowest level since 61.4 in March.
The 7-point drop in the consumer confidence index was largely unexpected, as analysts previously anticipated an increase in consumer confidence to 85.0.
“The rising level of unemployment and sentiment that a turnaround in labor market conditions is not around the corner have contributed to deflating consumers’ spirits this month,” Lynn Franco, director of the Conference Board’s Consumer Research Center, said in a press statement. “Expectations are likely to remain weak until the job market becomes more favorable.”
The nation’s unemployment rate rose to a nine-year high of 6.4 percent in June.
The proportion of consumers who felt that jobs are “hard to get” rose to 33.1 percent from 31.9 percent, while those claiming jobs are “plentiful” declined to 10.5 percent from 11.2 percent. The employment outlook also deteriorated. Consumers anticipating that more jobs will be available in the next six months fell to 16.8 percent from 18.9 percent, while those expecting a leaner job market increased to 19.8 percent from 16.9 percent.
The Conference Board’s expectations index plunged by 10 points, to 86.4 in July from a revised 96.4 in June, illustrating an overall unfavorable outlook on economic conditions. Consumers expecting business conditions to worsen in the next six months increased to 11.5 percent from 9.2 percent, while those expecting an improvement in the next six months fell to 20.2 percent from 23.5 percent.
Consumers who describe the economy in general as “bad” rose to 30.4 percent from 28.1 percent in June. Yet, at the same time, those believing business conditions will pick up increased to 16.3 percent from 14.9 percent.
The Conference Board’s Consumer Confidence Index is based on a representative sample from surveys mailed to 5,000 American households. The Consumer Confidence Index is seen as a critical gauge of the financial health of the nation since consumer spending accounts for nearly two-thirds of the domestic economy.
On Wall Street, stocks tumbled during morning trading hours following the Conference Board’s report of the unexpected drop in consumer confidence.
By mid-afternoon, however, the major market indices rebounded slightly, with the Dow Jones industrial average down 73 points, or 0.79 percent, at 9,194; the Standard & Poor’s 500 Index down 9 points, or 0.89 percent, at 988; and the tech-laden Nasdaq Composite Index down 9 points, or 0.53 percent, at 1,726.
Though the latest uninspiring consumer confidence numbers will not likely spur stock market investment, several other key economic reports due later this week — including gross domestic product figures on Thursday and employment data on Friday — are expected to provide a fuller picture of the U.S. economy’s health.
“The reaction was overly extended on the downside,” Tim Smalls, managing director at S.G. Cowen, a New York-based securities brokerage research firm, told Reuters. “It’s one number. We’ve got an awful lot of other numbers coming out this week.”