Consumer Confidence & Credit

Consumer confidence slid again in July. The Conference Board reported Tuesday that its Consumer Confidence Index fell to 90.8 — below the 92.3 economists expected — as Americans’ assessment of current business and labor market conditions declined for the third month in a row.

The reading captured a darker mood than the University of Michigan’s sentiment survey did earlier this month, when consumers appeared to be growing more optimistic as gas prices eased during a pause in the U.S.-Iran conflict. Analysts warned at the time that renewed fighting could stall that momentum. It did, as the resurgence of violence in the Gulf pushed pump prices back up and pushed sentiment back down.

If there is a single thread running through this summer’s economic data, it is uncertainty. Gas prices swing with events half a world away. Inflation, which seemed to be fading, has resurfaced. And the Federal Reserve, which announced that interest rates will remain at their current level, faces markets that no longer expect rate cuts this year and have begun pricing in increases instead. American households are being asked to plan their budgets in an economy that changes direction month to month.

Here is what doesn’t change: life keeps happening. The transmission fails on the car that gets a parent to work. The air conditioner gives out. Back to school expenses loom later in August. Emergency expenses don’t wait for confidence to recover, for gas prices to settle, or for the Fed to signal all clear. Roughly speaking, the moments when household confidence is lowest are precisely the moments when families are most likely to need help bridging a gap.

That is why access to credit matters most in times like these. For millions of Americans — including those with less than credit histories — a safe, transparent, installment loan is the difference between managing an unexpected expense and being overwhelmed by it. 

The lesson for policymakers is straightforward. In an economy where confidence is falling and prices are rising, the worst possible outcome is policy that narrows access to responsible credit. Rate caps and other restrictions don’t reduce a family’s need to borrow when the car breaks down; they only determine whether that family can turn to a reliable lender or is pushed toward costlier and riskier alternatives.

Confidence will recover; but until it does, policymakers at every level should ensure that the credit Americans rely on to weather uncertain times remains available to consumers who needs it — especially the ones with fewer options.

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