September Consumer Confidence Drops to Three-Year Low Amid Rising Economic Worries

Consumer confidence in the U.S. experienced a significant decrease in September 2024, marking the largest drop in over three years. The Consumer Confidence Index compiled by the Conference Board fell to 98.7, a notable decline from August’s 105.6. This sharp decrease reflects mounting concerns regarding labor market conditions, wages, and overall business sentiment as American citizens grow increasingly uncertain about the future of the economy.

The Present Situation Index, which evaluates consumers’ perceptions of current business and labor conditions, plummeted by over 10 points to 124.3, indicating a more pessimistic outlook on the economy’s well-being. On the other hand, the Expectations Index, which assesses short-term economic prospects for income and job availability, dropped to 81.7, its lowest reading since 2021. Although the expectations figure is above the critical threshold of 80, which is often viewed as a sign of an impending recession, analysts still express uncertainty regarding the economic outlook.

🚨 BREAKING: Consumer confidence falls the most in three years

Small businesses rely on strong consumers, but under the Biden-Harris Administration, Americans are facing rising prices, constant uncertainty and now falling confidence.https://t.co/ZfXletEDia

— House Committee on Small Business (@HouseSmallBiz) September 24, 2024

This decline in confidence was most pronounced among individuals aged 35 to 54, who exhibited the most significant decrease in sentiment. This group also witnessed a decline in their confidence levels on a six-month average, while younger Americans, especially those under 35, maintain a relatively positive outlook. Analysts attribute the widespread decrease in confidence to ongoing worries about inflation, job security, and rising interest rates​.

Another crucial factor contributing to this drop is the labor market, where indications of a slowdown are emerging. While unemployment rates remain low, there have been fewer job openings and reduced hours for some employees, causing apprehension. Despite these challenges, the labor market appears reasonably robust, with few reports of layoffs; however, confidence in sustained wage growth has diminished. As a result, consumers are becoming more cautious about their economic prospects​.

For consumers making more than $125k, confidence is at its highest since this past January … for those making $15k-$24.9k, confidence is at its lowest since February 2021 pic.twitter.com/M4g2QdReVX

— Kevin Gordon (@KevRGordon) September 24, 2024

Furthermore, inflation continues to heavily impact American households, despite a general slowdown in price hikes. In September, consumers’ inflation expectations slightly rose to 5.2%, still below the peak of 7.9% seen in March 2022. Concerns about inflation persist, with consumers frequently mentioning escalating prices in areas such as housing and energy as primary reasons for their economic uneasiness.

A notable change has been observed in consumers’ predictions for interest rates. For the fourth consecutive month, fewer Americans anticipate interest rates to rise in the upcoming year. Only 46.5% of respondents expect an increase, the lowest level recorded since February 2024. Conversely, the proportion of individuals expecting lower rates has increased, reflecting cautious optimism that the Federal Reserve’s extensive rate hikes might be reaching a conclusion​.

Despite the economic hurdles, expectations regarding the stock market among consumers have remained relatively steady. The percentage of individuals anticipating a rise in stock prices in the next year slightly decreased to 47.6%, while 25% predict a decline, indicating a more careful but constant outlook for financial markets​.

The decline in consumer confidence comes at a critical juncture as businesses and policymakers evaluate how persistent inflation, increasing borrowing costs, and a softening labor market could influence broader economic expansion. Although the U.S. economy has demonstrated resilience in the face of numerous challenges, the latest statistics underscore mounting concern among Americans. If consumer confidence continues to diminish, it could signify deeper economic challenges ahead, especially if inflation and labor market issues linger into 2025.