Consumers’ views on the economy fell significantly in September, registering the largest decline in over three years due to rising concerns about employment and business conditions, as reported by the Conference Board on Tuesday.
The Conference Board’s Consumer Confidence Index decreased to 98.7 from 105.6 in August, marking the steepest one-month decline since August 2021. The consensus forecast from Dow Jones had predicted a reading of 104.
All five components evaluated by the Board performed worse compared to the previous month, with the most substantial decline observed among those aged 35-54 and earning less than $50,000 annually.
Dana Peterson, chief economist at The Conference Board, stated, “Consumers’ assessments of current business conditions turned negative, while views of the current labor market situation further softened. Consumers were also more pessimistic about future labor market conditions and less optimistic about future business conditions and future income.”
The last significant drop in the confidence index occurred as inflation began its rise to the highest level in over 40 years.
The stock market experienced some losses following the news, and Treasury yields, although mostly positive during the session, also edged lower.
The Present Situation measure declined by 10.3 points to 124.3, and the Expectations Index fell by 4.6 points to 81.7. A reading below 80 on the Expectations measure is usually indicative of a recession.
Respondents’ concerns were mainly focused on jobs and inflation. The percentage of those stating that jobs are plentiful decreased to 30.9% from 32.7% in August, while the measure for jobs being “hard to get” increased to 18.3% from 16.8%.
Regarding inflation, the 12-month outlook rose to 5.2%, with price increases being a primary economic concern.
Peterson noted, “The proportion of consumers expecting a recession over the next 12 months remained low, but there was a slight increase in the percentage of consumers who believe the economy is already in a recession.”
This survey was conducted less than a week after the Federal Reserve voted to reduce benchmark interest rates by half a percentage point, citing a more favorable outlook for inflation and concerns over a potentially weakening labor market. This was the first rate reduction in four years and was double the traditional quarter-point cut.
