Consumer Confidence Declined in July: Policymakers Need to Correct Course

By at 27 July, 2022, 9:11 am


by Raymond J. Keating – 

The Conference Board has reported that consumer confidence continued declining in July. It’s clear from the report that consumers are worried about inflation and the possibility of recession.

Indeed, consumer confidence has been on the general decline since mid-2021.

As for the breakdown, it was noted: “The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell to 141.3 from 147.2 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—ticked down to 65.3 from 65.8.”

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, summed matters up this way:

“Consumer confidence fell for a third consecutive month in July. The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers.”

These concerns among consumers match the concerns of small business owners, as illustrated by SBE Council’s most recent “Small Business Policy and the Economy” survey. Namely, 88 percent of small business owners are concerned about a recession hitting in the coming year, and 92 percent are worried about inflation.

While assorted factors are in the mix regarding both inflation and recession – that is, the reality of stagflation and threat that it could get worse – there clearly are positive steps that policymakers need to be taking. Broadly, those are substantive, permanent, pro-growth tax and regulatory relief, advancing free trade, reining in government spending, and having monetary policy focus exclusively on price stability by reining in the unprecedented loose money the Fed has been running for fourteen years now.

This requires a major course correction by the Biden administration and Congress, as well as the Fed. And if policymakers get the policy mix right, that will provide a sound foundation upon which entrepreneurs, businesses, investors and workers can lead an economic recovery and expansion. If policymakers don’t course correct, they will continue to help make matters even worse.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.



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