Drop in US consumer confidence in temporary

US Conference Board's index of consumer confidence fell sharply to 90.9 in July is more than expected, which was recorded 99.8 in June. The consensus was expecting the index to post 100.0. The July drop was driven primarily by a decline in consumer expectations. This portion of the index fell to 79.9 (previous: 92.8), the weakest reading since February 2014, notes Barclays. 

The present situation component fell more modestly to 107.4 (previous: 110.3) and remains above its May level. Labor market sentiment declined across the survey, with forward expectations falling more than the current situation. Expectations for job gains fell more sharply to a net -6.9 with just 13.1% expecting more jobs (previous: 17.1) and 20% expecting fewer (previous: 15.2%). 

Automobile purchase plans declined to 10.8 (previous: 13.1), but home buying sentiment rose (5.9, previous: 5.6) and major appliance purchases (52.2, previous: 47.4) rose to the strongest level since July 2010. Compositionally the decline was more pronounced in younger households and those earning less than $50k. Overall, risks to the labor market outlook implied by this morning's report bear watching. The survey commentary suggests international risks from China and Greece have bled into domestic sentiment. 

"While one report does not change our expectation of solid consumer activity, the fact that the weakness was concentrated in the labor market outlook modestly increases downside risks around our baseline outlook for the US economy", says Barclays.