Consumer confidence fell at the sharpest pace in about three years while the annual inflation outlook edged higher, the Conference Board reported Tuesday. The consumer confidence index slid to 98.7 in September from an upwardly revised 105.6 in August. The consensus on Bloomberg was for a 104 level, which would have marked a slight improvement off August's unrevised level. "Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years," said Conference Board Chief Economist Dana Peterson. The index dropped at the fastest pace since August 2021 with all five of its components deteriorating, according to Peterson.
The present situation index tumbled 10.3 points to 124.3 this month while the expectations measure decreased 4.6 points to 81.7. A reading below 80 for the short-term outlook gauge usually signals a recession, according to the Conference Board. Consumers' assessments of the labor market softened further while their views on current business conditions turned negative, according to Peterson.
Expectations regarding the labor market grew more pessimistic while views on future business conditions turned less positive. "The deterioration across the consumer confidence index's main components likely reflected consumers' concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings -- even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages," Peterson said. Average 12-month inflation expectations increased to 5.2% in September, "despite slower overall inflation and declines in some goods prices," the Conference Board said.
The share of consumers expecting higher interest rates over the next 12 months dipped for the fourth month in a row to 46.5%. Last week, the Federal Reserve reduced benchmark rates by 50 basis points. Confidence fell the steepest among consumers aged 35 to 54, which the data show is the least confident age demographic on a six-month moving average basis, Peterson said.
Confidence declined across most income groups but dropped most significantly among consumers earning less than $50,000..