Consumer confidence fell for a third straight month in July as Americans grew more pessimistic about current business and labor conditions, the Conference Board reported Tuesday — setting a tense stage for today’s Federal Reserve policy decision, where traders are pricing in an unusually high one-in-three chance of a surprise rate hike.
The Consumer Confidence Index slipped 1.4 points to 90.8, missing the 92.0 consensus and continuing a downward trajectory that began in late 2021. The reading landed just as the Federal Open Market Committee wraps up its two-day meeting this afternoon, with markets on edge over whether Fed Chair Kevin Warsh will hold rates steady — or pull the trigger on a hike that would catch Wall Street off guard.
The Numbers
- Consumer Confidence Index: 90.8 (est. 92.0, prev. 92.2 revised up from 91.2) — Source: Conference Board, July 28
- Present Situation Index: 114.9, down 3.6 points — third consecutive monthly decline — Source: Conference Board
- Expectations Index: 74.7, unchanged and still in negative territory — Source: Conference Board
- Business Conditions (net): +1.1%, barely positive and down 2.6 points — Source: Conference Board
- Jobs Plentiful: 24.6%, down from 25.5% in June — Source: Conference Board
- Case-Shiller 20-City Home Price Index: +1.6% YoY (est. 1.3%, prev. 1.2%) — Source: S&P Dow Jones Indices via MarketWatch
- MBA Mortgage Applications: -6.4% for the week ending July 24 (prev. +1.9%) — Source: Mortgage Bankers Association
- 10-Year Treasury Yield: 4.63%, up 16 basis points over the past month — Source: Trading Economics
The confidence decline was driven entirely by worsening views of the present. The share of consumers describing business conditions as “good” fell to 18.9% from 20.2%, while those calling conditions “bad” rose to 17.8%. The labor market differential — the gap between those who say jobs are plentiful versus hard to get — narrowed to just +3.1 percentage points, its tightest reading in months.
“Consumer confidence moderated slightly in July, continuing a general downward sloping trajectory since late 2021,” said Dana M. Peterson, Chief Economist at The Conference Board. Notably, consumers’ write-in responses on the economy picked up more references to jobs and unemployment — and mentions of food and grocery prices increased.
FOMC Day: The Stakes
The Federal Reserve’s rate decision drops at 2:00 PM ET, and the vibe is different this time. The CME FedWatch Tool shows a 38% probability of a quarter-point hike — far from the near-certainty of steady rates that characterized the previous four meetings. An 80% chance of a September hike is already priced in, but the question is whether Warsh wants to get ahead of the curve now.
The hawkish case got fresh ammunition overnight. The U.S. military confirmed it intercepted what it described as a surprise Iranian attack targeting American troops stationed across the Middle East — reigniting tensions just days after ceasefire talks showed promise. Oil prices surged in response, with WTI crude jumping roughly 4.5% to around $82.72 a barrel. Higher energy costs flow directly into inflation, and with core PCE still running at 3.4% year-over-year — well above the Fed’s 2% target — the last thing Warsh needs is another oil shock.
“While a July rate hike remains highly unlikely, the September FOMC meeting could become the first meaningful test of whether the recent improvement in inflation proves durable,” Gregory Daco, chief economist at EY-Parthenon, said ahead of the meeting.
The market is more tentative than usual about the outcome of this meeting.
— analysts at CME Group, via Investopedia
Market Reaction
Stocks closed mostly higher on Tuesday ahead of the decision, with the Dow adding roughly 550 points (+1.2%) as falling oil prices earlier in the session boosted sentiment. But the overnight oil reversal — driven by the Iran flare-up — could sour Wednesday’s open. The S&P 500 finished +0.2% while the Nasdaq shed 0.8%, dragged by continued chip-sector weakness. The 10-year Treasury yield held steady around 4.63% as bond traders waited for Warsh’s signal.
What to Watch Thursday
Tomorrow brings the week’s heaviest data dump — and it could either validate the Fed’s patience or force its hand:
- Q2 GDP (advance): Consensus expects 1.8% annualized growth, down from 2.1% in Q1 — Source: MarketWatch
- Jobless Claims: Weekly initial claims — the four-week moving average has been a key labor market signal — Source: DOL
- PCE Inflation (June): Headline PCE expected at -0.1% month-over-month (3.7% YoY), core PCE at +0.2% (3.3% YoY) — Source: MarketWatch consensus
- Personal Income & Spending: Income expected +0.3%, spending +0.3% — Source: MarketWatch consensus
Bottom Line
The consumer is telling one story — growing caution, softening labor market perceptions, three straight months of declining confidence — while the Fed faces another: inflation above target, oil prices surging on fresh Middle East hostilities, and a bond market pricing in hikes. Today’s decision is almost certainly a hold. But Warsh’s press conference at 2:30 PM ET will be scoured for any shift in tone — and tomorrow’s GDP and PCE data could make September the real showdown.
The consumer confidence report’s survey period ran July 1–22, meaning it captured the period when Iran ceasefire talks showed promise — but missed the overnight flare-up. If tensions escalate further, August’s confidence print could look considerably worse.