Consumer confidence in the economy plummeted in September, marking the steepest decline in over three years, as growing concerns about jobs and business conditions intensified, according to the Conference Board's report released on Tuesday.
The Board's September 2024 Consumer Confidence Index fell in September to 98.7 from an upwardly revised 105.6 in August, the biggest one-month decline since August 2021.
The Index is based on a benchmark of 100, which was set in 1985. Above 100 indicates that consumers are more optimistic than the benchmark and are less likely to save and more likely to spend, whereas below a score of 100 denotes that consumers are more pessimistic than the benchmark and are more likely to save and less likely to spend. A score of 100 means that consumers are neutral compared to the benchmark.
“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, chief economist at The Conference Board. “September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income."
The drop in confidence was steepest for consumers aged 35 to 54. Consumers under 35 remain the most confident.
"Confidence declined in September across most income groups, with consumers earning less than $50K experiencing the largest decrease. On a six-month moving average basis, consumers earning over $100K remained the most confident," Peterson added.
Mentions of interest rates, prices, and inflation dominated consumer concerns. The share of consumers expecting higher interest rates over the next 12 months fell for the fourth consecutive month to 46.5%, while those expecting lower rates rose to 33.3%, marking the highest since April 2020.
Inflation expectations increased to 5.2% in September, though still below the March 2022 peak of 7.9%. Expectations for the stock market stabilized, with 25% anticipating a decline and 47.6% expecting gains.
While still positive, consumers’ assessments of their family's financial situation — both current and expected over the next six months — weakened in September compared to August.
Present Situation Measures
The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — fell by 10.3 points to 124.3.
Consumers’ assessments of current business conditions turned negative in September.
- 18.8% of consumers said business conditions were “good,” down from 21.1% in August.
- 20.2% said business conditions were “bad,” up from 17.3%.
Consumers’ appraisals of the labor market deteriorated in September.
- 30.9% of consumers said jobs were “plentiful,” down from 32.7% in August.
- 18.3% of consumers said jobs were “hard to get,” up from 16.8%.
Expectations Six Months Hence
The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — declined by 4.6 points to 81.7, but remained above 80. (A reading below the threshold of 80 usually signals a recession ahead.)
Consumers were less optimistic about the business conditions outlook in September.
- 18.5% of consumers expected business conditions to improve, down from 19.1% in August.
- 16.6% expected business conditions to worsen, up from 14.5%.
Consumers’ assessments of the labor market outlook were more pessimistic in September.
- 16.4% of consumers expected more jobs to be available, up slightly from 16.3% in August.
- But 18.3% anticipated fewer jobs, up from 17.0%.
Consumers’ assessments of their income prospects were less optimistic in September.
- 18.0% of consumers expected their incomes to increase, down from 18.6% in August.
- 13.0% expected their incomes to decrease, up from 11.7%
Additionally, consumers' perceived likelihood of a U.S. recession over the next 12 months ticked up in September but remained well below the May 2020 peak.
The Board's next Consumer Confidence release is set for Tuesday, October 29.
