WASHINGTON (Reuters) – US consumer confidence fell more than expected in July amid an outbreak of COVID-19 infections across the country, threatening the economy’s recovery from an unprecedented recession caused by the pandemic.
FILE PHOTO: A shopper is seen wearing a mask while shopping at a Walmart store in North Brunswick, New Jersey, USA, July 20, 2020. REUTERS / Eduardo Munoz
The Conference Board poll on Tuesday showed gloomy consumers about the outlook for the economy in the next six months. The ebb in confidence comes as millions of unemployed Americans will lose a weekly unemployment benefit supplement of $ 600 on Saturday.
“The increase in virus cases resulting in a pause or retracements of reopens certainly weighs on sentiment,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York. “Consumers are also concerned about job and income prospects. Without virus containment that allows for a more complete reopening of the economy, confidence measures will continue to be under pressure in the future. ”
The consumer confidence index fell to a reading of 92.6 this month from 98.3 in June. Economists polled by Reuters had forecast the index would drop to 94.5 in July.
The reopening of the companies has fueled economic activity in recent months, but left the country struggling to contain the resurgence of new cases of coronavirus, forcing some authorities in the affected southern and western regions to close business again or halt reopening.
As a result, the number of people claiming unemployment benefits increased in mid-July for the first time since late March, when nonessential business closings nearly paralyzed the economy. The economy fell into recession in February.
Senate Republicans on Monday announced a $ 1 trillion coronavirus aid package negotiated with the White House. The proposal, however, sparked immediate opposition from both Democrats and Republicans. Democrats denounced it as too limited compared to its $ 3 billion proposal that was approved by the House of Representatives in May. Some Republicans called it too expensive.
Economists have credited the additional $ 600 in weekly unemployment benefits for the pickup in economic activity. The supplement is part of a nearly $ 3 trillion historical tax package. With the staggering 31.8 million people who cashed unemployment checks in the first week of July, economists warned that this supplement should not expire.
Stocks on Wall Street were lower. The dollar was stable against a basket of currencies. US Treasury prices rose.
Chart: Interactive consumer confidence – here
HOUSING MARKET RESILIENCE
The current status measure in the Conference Board survey, based on consumers’ assessment of current business and employment conditions, rose to a reading of 94.2 this month from 86.7 in June. But the index of expectations based on consumers’ short-term outlook for income, business and labor market conditions fell to 91.5 from a reading of 106.1 in June.
That was the biggest drop since March, which was the fifth biggest drop on record.
“While the current situation index increased over the month, if the economy does not regain momentum ahead, we are likely to see a reduction in the current assessment soon,” said Kathy Bostjancic, chief US financial economist at Oxford Economics In New York.
The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to come by, improved to a reading of 1.3 this month from -2.8 in June. That measure closely correlates with the unemployment rate in the Labor Department’s employment report. It has fallen from 38.3 in August last year.
The proportion of consumers expecting an increase in income changed little by 15.1% this month, and the proportion anticipating a drop increased to 15.0% from 14.1%.
Despite doubts about the economy, the housing market appears to be weathering storm COVID-19, thanks to historically low mortgage rates.
In a separate report on Tuesday, the Commerce Department said the home ownership rate rose a record 2.6 percentage points in the second quarter to 67.9%, the highest since the third quarter of 2008.
The unemployment burden of the pandemic has fallen disproportionately on low-wage workers, who economists tend to be tenants. The strength of the housing market could persist, with the Conference Board survey showing the proportion of consumers planning to buy a home in the next six months in July.
A third report showed that the S&P CoreLogic Case-Shiller Home Metropolitan Area Index of 20 metropolitan areas rose 3.7% from a year earlier in May after gaining 3.9% in April.
“In a remarkable show of resilience, the housing market has seen the pandemic in sight and has not blinked,” said Matthew Speakman, economist at Zillow. “The housing market is likely to feel the effects of this recession at some point, but inventory shortages and low rates should continue to push prices up.”
Graphic: Interactive housing – here
Reports by Lucia Mutikani, Franklin Paul and Andrea Ricci Edition
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