U.S. consumers are under a lot of pressure, no matter how you slice it.
Between the ongoing war with Iran that was only supposed to last a few weeks, fluctuating oil prices that are driven by social media posts from the President, and stubborn inflation that the government just can’t seem to get under control, consumers are feeling the effects of it all.
While the Consumer Confidence Index published by The Conference Board showed that Americans remained resilient despite softening confidence, the narrative shifted significantly in September, leading researchers to call it a deterioration in confidence.
U.S. consumers turn negative on the economy
September marked the third consecutive month of declining confidence, but the fall from August was more pronounced than in the previous months.
“The Consumer Confidence Index deteriorated notably in September, following two prior months of softening,” said Dana M Peterson, Chief Economist, The Conference Board. “The Present Situation Index fell sharply, while the Expectations Index slipped further into negative territory. Consumer appraisals of current business conditions became negative for the first time since September 2024.¨
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The Consumer Confidence Index fell by 6.7 points to 81.9 in September, down from 88.6 in August.
The Present Situation Index — which measures consumers’ assessment of current business and labor market conditions — dropped by 7.9 points to 109.3.
The Expectations Index — which measures consumers’ short-term outlook for income, business, and labor market conditions — fell by 5.9 points to 63.3.
What is driving economic confidence levels lower?
According to the survey, while perceptions of the labor market remain positive, perceptions of the current labor market have worsened.
But that’s just one of the factors leading to the loss of confidence.
“Consumers’ write-in responses regarding factors affecting the economy were mostly pessimistic in September,¨Peterson said. ¨References to prices, the high cost of goods and services, and oil and gas prices in particular, rose to new heights, reflecting September’s surge in fuel costs. Comments about war/conflict eased this month but remained elevated. Consumers also frequently cited politics, trade, and employment in their write-in responses, though to a lesser extent.”
Pulling out to a wider view on a six-month moving-average basis, confidence across all age groups and nearly all income groups declined in September. Consumers with a household income between $125,000 and $149,000 reported the greatest decline in confidence over the last six months.
Meanwhile, Gen Z, followed by Millennials, maintained the highest confidence on a six-month moving average, while the three oldest generations continued to show weakness.
Confidence fell among Democrats, Republicans, and Independents alike.
Consumer confidence by the numbers
According to the survey, 18.5% of consumers said that business conditions were good, down from 18.8% in August, while 20.4% said business conditions were bad, up from 17.3%.
Nearly 24% of consumers said that jobs were “plentiful,” down nearly 1 percentage point from the 24.5% who felt that way in August. About 22% said jobs were “hard to get,” up from 20.3% prior.
Looking to the future, 15.9% of those surveyed said they expect business conditions to improve, down from 17% in August, while 25.4% expected them to worsen, up from 23.3%.
They were also more negative about the labor market outlook, with 14% expecting more jobs to be available, down from 14.8% in August, while 28.4% expected fewer jobs, up from 26.1%.
Lower confidence leads to less spending
Consumers increasingly worried about the labor market and business conditions will naturally want to spend less on things they can go without.
Expected spending on services over the next six months fell in September. The top 5 planned services consumers expect to spend money on were: restaurants/bars/takeout, streaming/internet/mobile services, beauty and personal care, utilities, and healthcare. Meanwhile, the anticipated spending for discretionary activities like hotels, movies, airfare and amusement parks moderated.
The six-month average on plans to purchase autos and homes also declined slightly. Among durable goods, furniture and smartphones remained priorities, while spending plans on refrigerators and TV sets fell the most on a six-month moving-average basis.
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