Americans' confidence in the economy fell in July as gas prices climbed back above $4 per gallon, driven by escalating conflict with Iran that's now in its first year. The Conference Board reported Tuesday that its consumer confidence index dropped to 90.8 from 92.2 in June, continuing a pattern of tepid readings that's persisted since the beginning of the year. In late 2024 and early 2025, the index stood well above 100.
The decline reverses a modest improvement seen in June, when gas prices had fallen to around $3.70 per gallon from more than $4.50 in late April and early May. But renewed fighting in the Middle East pushed the average price for a gallon of gas to $4.10 on Tuesday, according to AAA.
The Iran Factor
After being attacked by the U.S. and Israel in late February, Iran shut down the Strait of Hormuz, through which about one-fifth of the world's oil travels. That closure caused a spike in gas prices that accelerated inflation and forced Americans' inflation-adjusted incomes to decline. The war began Feb. 28, when inflation stood at 2.4%. It's now 3.5%, up from 3% in January 2025 during the first year of Trump's term.
President Donald Trump continued to blame inflation on his predecessor, Democrat Joe Biden. The economic headwinds could pose a risk to Trump and Republicans in the midterm elections, which were less than 100 days away.
Grocery Prices Hit Hard
Write-in responses to the survey, collected from July 1 to July 22, remained pessimistic. The Board said references to gas prices were down slightly but remained elevated, while respondents' mentions of food and grocery prices increased. Government data showed that buying food to bring home had gotten 33% more expensive since the beginning of 2019.
Americans have turned to couponing, comparison shopping and cutting back on favorite foods as they absorb the biggest jump in grocery prices in a half-century. Beef has become a symbol of those higher costs. The price of a pound of ground beef reached $6.82 in June, 79% more than at the beginning of 2019, according to Bureau of Labor Statistics data.
Labor Market Softens
References to jobs and unemployment picked up slightly in July and views of the current job market fell. Expectations for the labor market six months ahead improved slightly, but remained in negative territory. U.S. employers slowed hiring last month and added only 57,000 jobs, less than half the previous month's total.
The unemployment rate declined to 4.2% from 4.3% in May, though the drop mostly occurred because many people out of work gave up looking and were no longer counted as unemployed. That's a troubling sign for an economy already grappling with elevated costs.
The number of consumers who mentioned war and geopolitics decreased in July, but the Board said recent escalation in fighting between Iran and the U.S. could cause those mentions to rise in the next survey.
Trade and Growth
The U.S. goods trade deficit contracted less than expected in June and remained a drag on second-quarter GDP growth. Automotive vehicle exports rose 5.1% and exports of consumer goods rose 3.2%. The government was scheduled to publish the advance estimate of second-quarter GDP growth on Thursday.
Why This Matters:
The persistent weakness in consumer confidence reflects real damage to household budgets from inflation that's been elevated for five years. When families can't afford ground beef and must clip coupons just to manage grocery bills, that's not a statistical abstraction—it's a failure of economic policy. The Iran conflict has demonstrated how quickly geopolitical instability can translate into pain at the pump and the checkout counter, undermining the purchasing power that drives two-thirds of U.S. economic activity. With the labor market softening and people dropping out of the workforce, the dual pressures of rising costs and weakening job prospects create exactly the conditions that punish incumbent parties at the ballot box. Trump's challenge isn't just defending his economic record against Biden's—it's convincing voters that his administration can restore the stability and affordability they enjoyed before inflation took off.