Americans' confidence in U.S. economy falls again as Iran conflict sends gas prices higher

Americans' confidence in the U.S. economy has fallen for the second consecutive month, with rising gas prices linked to escalating conflict between the U.S. and Iran cited as a primary driver. The Conference Board reported Tuesday that its consumer confidence index dropped to 90.8 in July, down from 92.2 in June. This figure remains within the same subdued range observed since the beginning of the year, a stark contrast to readings well above 100 in late 2024 and early 2025.

Consumer sentiment had seen a modest improvement in June as gas prices decreased to around $3.70 per gallon. However, the recent intensification of fighting in the Middle East has reversed this trend, pushing the average gas price back up to $4.10 per gallon as of Tuesday, according to AAA. The conflict, which began with U.S. and Israeli attacks on Iran in late February, led Iran to shut down the Strait of Hormuz, a critical global oil transit route. This disruption accelerated inflation, causing a decline in Americans' inflation-adjusted incomes.

Concerns about the economy persist, with five years of elevated inflation potentially posing a risk to President Donald Trump and the Republican party in the upcoming midterm elections, less than 100 days away. Trump continues to attribute inflation to his predecessor, Joe Biden, despite data showing inflation rising since Trump's inauguration. Inflation stood at 3.5% in July, up from 3% in January 2025, and jumped further after the Iran conflict began on February 28, when it was only 2.4%.

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Americans' confidence in the economy fell this month as gas prices resumed their climb after the U.S. and Iran stepped up their fighting.

Survey responses collected from July 1 to July 22 reveal continued pessimism. While mentions of gas prices slightly decreased, they remained elevated. Conversely, references to food and grocery prices increased, with government data indicating a 33% rise in the cost of groceries since early 2019. To cope, Americans are increasingly using coupons, comparison shopping, and cutting back on favorite items. The price of ground beef, for example, reached $6.82 per pound in June, a 79% increase since early 2019.

Views on the job market have soured, although expectations for the labor market six months ahead improved slightly but remain negative. U.S. employers slowed hiring in the previous month, adding only 57,000 jobs, less than half the number from the month prior. The unemployment rate fell to 4.2% from 4.3%, largely because individuals stopped seeking work and were thus no longer counted as unemployed.

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Beef epitomizes out-of-control grocery prices for many Americans.