Consumers' sentiment toward the economy deteriorated in September to the sharpest level in more than three years as concerns about jobs and business conditions grew, the Conference Board reported Tuesday.
The panel's consumer confidence index fell to 98.7 from 105.6 in August, the biggest monthly decline since August 2021. The Dow Jones consensus forecast was 104. In contrast, the index was 132.6 in February 2020, a month before the Covid pandemic broke out.
All five areas examined by the organization saw worsening figures in the reporting month, with the biggest decline being among 35- to 54-year-olds earning less than $50,000.
“Consumers' assessments of current business conditions turned negative, while views of current labor market conditions continued to weaken. Consumers also became more pessimistic about future labor market conditions and less positive about future business conditions and future incomes,” said Dana Peterson, chief economist at the Conference Board.
The last time the confidence index fell more sharply was when inflation was just beginning to rise, ultimately reaching its highest level in more than 40 years.
Following the release, stock prices suffered short-term losses, while US Treasury yields declined.
In addition to the sharp decline in the confidence index, the situation index deteriorated by 10.3 points to 124.3 and the expectations index fell by 4.6 points to 81.7. A value below 80 in this expectations index is an indicator of a recession.
The respondents' concerns focused primarily on jobs and inflation.
The share of those saying there are plenty of jobs continued to decline, falling to 30.9 percent from 32.7 percent in August, while the number of those saying there are plenty of jobs rose to 18.3 percent from 16.8 percent.
Regarding inflation, the 12-month forecast rose to 5.2%, with concerns about price increases topping the list of economic worries.
“The share of consumers who expect a recession in the next 12 months remains low, but the share of consumers who believe the economy is already in a recession has increased slightly,” Peterson said.
The survey comes less than a week after the Federal Reserve decided to cut interest rates by half a percentage point, citing a more favourable inflation outlook and concerns about a potentially weakening labour market. It was the first rate cut in four years and double the traditional quarter-percentage point cut.
However, the survey was conducted until September 17, one day before the Fed approved the interest rate cut.
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