US consumer confidence plummeted to its lowest point in over three years last month, experiencing the most significant decline since April 2003. According to the Conference Board, the consumer confidence index dropped to 98.7 from 105.6 in August, exceeding the Dow Jones consensus estimate of 104. This decline marks the steepest drop since August 2021. For context, the index stood at 132.6 in February 2020, just as the full impact of the COVID-19 pandemic was beginning to unfold.
All of the Conference Board’s components decreased in the month, and the most afflicted consumers were the working-class consumers aged between 35 and 54 years old, with annual incomes of less than $50,000. Consumers were less optimistic about current conditions, which turned negative. They also had an even dimmer outlook about the labor market conditions, which deteriorated further. Further, they become even more pessimistic about the future labor market conditions, business conditions, and their personal income, according to Dana Peterson, chief economist at The Conference Board.
This happens because consumer confidence index has declined and inflation is rising-another indicator that increases are hitting a level that hasn’t been seen since at least the late 1970s. Stock market fell marginally while Treasury yields declined in response to the report.
This was revealed from the situation measure that dipped by 10.3 points to 124.3, while the expectations index declined by 4.6 points to 81.7. Apart from the overall decline in the confidence index, apart from the overall decline in the confidence index, a reading below 80 on the expectations measure often represents recessionary conditions.
Respondents also were more anxious primarily about job prospects and inflation. The percentage of customers who said jobs are “plentiful” fell to 30.9 percent from 32.7 percent in August, while those who said jobs are “hard to get” rose to 18.3 percent from 16.8 percent. Inflation expectations rose to 5.2 percent over the next 12 months, which would really spur growing concerns that prices are getting out of control.
The more consumers now believe that the economy has already gone into recession, still just a small percentage of respondents believe the economy will enter into recession within the next 12 months. The survey was conducted before the Federal Reserve’s recent half-percentage point cut in benchmark interest rates, which it said was based on more optimistic inflation outlooks and anxiety over a possibly weakening labor market. It was done September 17, before the rate cut announcement was made.
