Independent research firm Pantheon Macroeconomics has flagged that the continued deterioration in consumer confidence bolsters the case for a pronounced slowdown in US consumer spending during the second half of this year. The firm notes that while households have grown slightly more optimistic about the labor market, weaker retail sales figures and renewed dips in sentiment both point toward cooling consumption.
The Conference Board's consumer confidence index fell to 89.4 in August, down from a downwardly revised 90.2 in July and below the 90.1 consensus forecast. Pantheon analysts Samuel Tombs and Oliver Allen highlight that the expectations index tends to be a more reliable guide for future consumer spending than the headline or present situation components. The two-month average reading of 71.1 for July and August, they argue, signals a meaningful deceleration in third-quarter consumption growth compared to the 2.2% annualized pace recorded in the second quarter.
Analysts attribute the resilience of spending in the first half — particularly in Q2 — to several one-off factors, most notably a large wave of personal income tax refunds. That refund season has now concluded, having ended in May, while elevated gasoline prices are increasingly weighing on households.
Labor market data, however, offers a more encouraging sign. The share of households reporting that jobs are "hard to get" dropped from 21.7% to 19.5% in August, while those saying jobs are "plentiful" rose from 24.4% to 27.0%. This pushed the employment spread — the difference between the two — from 2.7 in July to 7.5.
Nevertheless, Pantheon cautions that this improvement may not signal a turning point in hiring, as the labor market components of the Conference Board survey are often subject to substantial revisions. Even taking the latest readings at face value, they imply only around 25,000 initial private-sector job gains per month — a figure that approaches zero once likely revisions are considered. The firm currently estimates initial private payroll growth of roughly 66,000 per month, in line with the three-month average.
Other hiring indicators, including regional Federal Reserve surveys and job posting data from Indeed and LinkUp, remain subdued, according to Pantheon.
The housing market presents another source of weakness. New home sales fell 10.5% in July to a seasonally adjusted annual rate of 607,000, down from June's upwardly revised 678,000. While Pantheon acknowledges these figures are highly volatile, the three-month average has held near 650,000. The firm suggests that slower growth in the working-age population due to reduced immigration, a softening labor market, weak consumer confidence, and a rebound in mortgage rates could all continue to pressure new home sales.
Inventory levels remain elevated — the three-month average through July stood at 9.1 months of supply, well above the long-run average of just over six months. Pantheon expects homebuilders to respond to this glut by cutting prices or offering incentives, while also scaling back new project starts. Although single-family building permits have stabilized, the firm's analysis points to another decline in the coming months.