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US Consumer Less Upbeat as COVID-19 Cases Spike in Major Hubs

Adam Corbett July 28, 2020

Risk-off seems to be dominating markets this morning and the US consumer appears to be following suit.

The Conference Board released its July Consumer Confidence survey this morning, with the headline index coming in at 92.6 and missing the Street’s 94.0 expectation. This decline follows the 98.1 reading for June, marking a potential reversal in consumer’s optimism.

The data had a rather muted impact on currency markets, as new COVID-19 headlines continue to dominate mainstream headlines.

Breaking down the headline print, the Present Situation Index improved from 86.7 to 94.2. This highlights the consumers’ assessment of current business and labor market conditions. Interesting to note here is that consumers describing business conditions as “good” did not change. Rather, the increase came from a decline in consumers describing business conditions as “bad.”

Weighing down this gain was the Expectations Index – consumers’ short-term outlook for income, business and labor market conditions – which decreased from 106.1 to 91.5. So, while the US consumer views the present situation as substantially better than June, its outlook for the future is less than rosy.

The drop in consumer confidence creates a bearish backdrop for the economy; as consumers worry about the future, they tend to spend less, putting an implicit cap on economic growth.

With new COVID-19 cases rising across the largest states, including California, Michigan, Texas and Florida, it is understandable to see why consumers’ financial confidence has been dampened.

Earlier this morning, the Fed released a statement outlining their credit market operations and subsequent subsidy programs will be extended from the September 30th deadline until the end of 2020. This may be the catalyst for an uptick in consumer confidence in the months ahead, although, at some point, printing more money could erode the spending power of US consumers.

Adam Corbett
Currency Analyst & Team Lead – Business Development
acorbett@cambridgefx.com

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