Consumers’ perception of the economy took a significant hit in September, experiencing the largest decline in over three years due to growing concerns about job security and business conditions, according to a report by the Conference Board released on Tuesday.
The consumer confidence index dropped to 98.7 from 105.6 in August, marking the most substantial one-month decrease since August 2021. The Dow Jones consensus had anticipated a reading of 104. In contrast, the index stood at 132.6 in February 2020, just before the onset of the Covid pandemic.
All five components surveyed by the organization showed declines, with the most significant drop observed among individuals aged 35-54 with incomes below $50,000.
Dana Peterson, the chief economist at The Conference Board, noted, “Consumers’ evaluations of current business conditions turned negative, and perceptions of the current labor market situation weakened. Consumers also expressed more pessimism regarding future labor market conditions, as well as less optimism about future business conditions and income.”
The last time the confidence index experienced a more substantial decline was during the early stages of an inflation surge that eventually reached its highest level in over 40 years.
Following the report, stocks briefly dipped, and Treasury yields decreased.
In addition to the sharp decline in the confidence index, the present situation measure dropped by 10.3 points to 124.3, while the expectations index fell by 4.6 points to 81.7. A reading below 80 on the expectations measure is indicative of a recession.
Respondents primarily expressed concerns about jobs and inflation. The percentage of individuals reporting that jobs were plentiful decreased to 30.9% from 32.7% in August, while the measure for jobs being “hard to get” rose to 18.3% from 16.8%.
Regarding inflation, the 12-month outlook increased to 5.2%, with worries about price hikes ranking as a top economic concern.
Peterson highlighted, “The number of consumers expecting a recession in the next 12 months remained low, but there was a slight rise in those believing the economy was already in recession.”
The survey was conducted until September 17, a day before the Federal Reserve’s decision to cut benchmark interest rates by half a percentage point, citing improved inflation prospects and concerns about a potentially weakening labor market. This rate cut, the first in four years and double the usual quarter-point reduction, followed the survey period.
