The Conference Board’s recent report revealed a significant decline in the Consumer Confidence Index® for September 2024, dropping to 98.7 from an upwardly revised 105.6 in August. This indicates the most substantial decline seen since August 2021, reflecting a substantial decrease in consumer sentiment.
Chief Economist Dana M. Peterson emphasized that all five components of the Index saw a downturn, highlighting a broad-based erosion of confidence. This decline was notably pronounced among consumers aged 35 to 54 and those with incomes below $50,000. This group’s concerns regarding the labor market and overall economic conditions persisted, despite indications of a healthy job market featuring low unemployment rates and elevated wages.
Moreover, the survey recorded increasing inflation expectations among consumers, impacting their buying intentions adversely across various categories of goods and services.
Key Takeaways
- The Consumer Confidence Index dropped to 98.7 in September from 105.6 in August.
- This marks the sharpest decline in consumer sentiment since August 2021.
- Consumers aged 35 to 54 and those earning below $50,000 were most affected.
- Inflation expectations among consumers have increased.
- Despite economic indicators of a strong job market, consumer confidence plummeted.
Overview of September’s Consumer Confidence Decline
In September 2024, consumer confidence experienced a notable decline, as revealed by the monthly survey conducted by The Conference Board. The survey plays a critical role in measuring the collective sentiment of consumers regarding the state of the economy and their financial well-being. This significant drop in consumer confidence reflects growing concerns over multiple economic aspects, which in turn influences consumer behavior and spending patterns.
Introduction to Consumer Confidence
Consumer confidence is a vital economic indicator that gauges consumer sentiment about their financial situation and the broader economy. This month, the survey results—published by The Conference Board—underscore a downward trend in consumer optimism. The consumer confidence index fell to 98.7 (1985=100), a decline from 105.6 in August. The Present Situation Index dropped by 10.3 points to 124.3, while the Expectations Index decreased by 4.6 points to 81.7. These figures indicate that both current conditions and future expectations have worsened.
September 2024 Consumer Confidence Survey® Highlights
Key insights from the September 2024 survey reveal critical shifts in consumer sentiment:
- Average 12-month inflation expectations rose to 5.2%, up from a previous peak of 7.9% in March 2022.
- 18.8% of consumers rated business conditions as “good,” down from 21.1% in August.
- 20.2% of consumers rated business conditions as “bad,” up from 17.3% in August.
- 30.9% of consumers believed jobs were “plentiful,” down from 32.7% in August.
- 18.3% of consumers believed jobs were “hard to get,” up from 16.8% in August.
- Consumers expecting higher interest rates fell to 46.5%, the lowest since February 2024.
- Those expecting lower interest rates increased to 33.3%, the highest since April 2020.
The economic data analysis shows that sentiment concerning business conditions and job availability remains mixed. Notably, the September consumer confidence falls most significantly among those earning below $50K, indicating a more profound impact on lower-income households. Consequently, these trends may herald potential adjustments in consumer spending, particularly among financially vulnerable groups.
Overall, the comprehensive view of this month’s survey portrays a cautious outlook toward imminent economic conditions, with both the indices of current and future expectations registering evident drops, signaling elevated economic uncertainty.
| Indicator | August 2024 | September 2024 |
|---|---|---|
| Consumer Confidence Index | 105.6 | 98.7 |
| Present Situation Index | 134.6 | 124.3 |
| Expectations Index | 86.3 | 81.7 |
| Inflation Expectations | 5.0% | 5.2% |
Factors Contributing to the Decline in Consumer Confidence
September’s consumer confidence index fell sharply to 98.7 from 105.6 in August, marking the largest one-month decline in over three years. The sharp drop can be attributed to several key factors ranging from labor market concerns to inflation and interest rates, and the overall consumer sentiment on economic conditions.
Labor Market Concerns
Despite overall low unemployment rates, there are significant labor market concerns contributing to the decline in consumer confidence. The percentage of respondents reporting jobs as plentiful decreased to 30.9%, down from 32.7% in August. Furthermore, the measure of jobs being “hard to get” rose to 18.3% from 16.8%, highlighting increased difficulties in finding employment. These changes reflect rising uncertainty about future employment conditions, which is a major contributor to the weakening confidence.
Inflation and Interest Rates
Inflation remains a persistent concern among consumers. The average 12-month inflation outlook increased to 5.2%, with price hikes being a top economic concern. Additionally, the Expectations Index dropped to 81.7, indicating broader anxieties about future economic conditions. The Federal Reserve’s decision to lower the benchmark interest rates by half a percentage point in mid-September underscores these inflation fears, aiming to buffer the economy but also highlighting the delicate balance of maintaining consumer confidence amidst fluctuating inflation and interest rate concerns.
Consumer Sentiment on Economic Conditions
Consumer sentiment on economic conditions is also contributing to the declining confidence. The Present Situation Index worsened by 10.3 points to 124.3, reflecting a more pessimistic view of current economic conditions. Additionally, the percentage of consumers believing business conditions are “good” dropped to 18.8% from 21.1% in August, while those perceiving business conditions as “bad” increased to 20.2% from 17.3%. This shift in perception paints a clearer picture of the growing concerns consumers have regarding current and future economic stability, impacting their overall confidence.
These factors collectively provide a comprehensive understanding of the reasons behind the sharp decline in consumer confidence, revealing the broader economic anxieties prevalent among consumers.
Impact on Different Demographics and Income Groups
The decline in consumer confidence in September has demonstrated a significant demographic impact, with effects varying across different age brackets and income levels. Analysis of the data reveals that middle-aged consumers, specifically those aged 35-54, experienced a more pronounced drop in confidence. This group’s reduced assurance may lead to tangible consequences for markets and industries that rely heavily on their spending habits.
Furthermore, an in-depth income group analysis shows that lower-income groups, particularly those earning less than $50,000 annually, are suffering the steepest decline in confidence. This dip is expected to drive changes in consumer behavior trends, potentially resulting in tighter budgets and more reserved financial decisions among these consumers. In contrast, confidence among those in higher-income brackets, especially consumers earning over $100,000, exhibited less volatility, suggesting a buffer against economic uncertainties.
Additionally, the broader implications of these shifts in sentiment are evident in consumer behavior trends. Families and individuals within the lower income groups might reduce discretionary spending, prioritizing essentials and leaning towards cost-saving measures such as opting for cheaper brands or taking advantage of discounts and loyalty schemes. This cautious approach can markedly impact sectors like retail and entertainment, where non-essential spending is a significant driver of revenue.
The findings also highlight that while consumer confidence plummeted, there remains a sense of cautious optimism among higher-income earners and specific demographics, such as younger adults. These segments showed resilience, likely due to factors such as improved job security sentiment and favorable economic conditions earlier this year, including lower inflation rates and wage growth.
Looking ahead, the demographic impact and income group analysis of consumer confidence will be pivotal in forecasting economic trends. Businesses and policymakers must heed these nuanced shifts to address the needs and preferences of varied consumer segments, ultimately fostering a more robust economic recovery.
| Demographic | Consumer Confidence Change | Income Group | Behavioral Trends |
|---|---|---|---|
| Ages 35-54 | Steeper Drop | Under $50,000 | Increased Budget Caution |
| Younger Adults | Resilient | Over $100,000 | Stable Confidence |
September Consumer Confidence Falls the Most in Three Years
The Conference Board’s consumer confidence index experienced a remarkable decline in September, falling sharply to 98.7 from 105.6 in August. This drop of 6.9 points marks the most significant one-month decline since August 2021. Such a steep fall underscores a drastic shift in consumer perspective towards the economy, making this economic news particularly noteworthy.
Historical data reveals a longer-term trend; for instance, in February 2020, the consumer confidence index was at a robust 132.6. However, the current figure of 98.7 illustrates a significant decrease in consumer sentiment since the pandemic’s onset. This troubling trend reflects broader economic concerns and potential signals of a challenging road ahead.
Demographics further reveal the impact of this decline. Respondents aged 35-54 and those earning less than $50,000 experienced the most substantial drops in confidence levels. This group’s sentiment is crucial as it often represents a significant portion of the workforce and consumer base, whose spending habits can influence broader economic patterns.
| Index Component | August | September | Change |
|---|---|---|---|
| Consumer Confidence Index | 105.6 | 98.7 | -6.9 |
| Present Situation Measure | 134.6 | 124.3 | -10.3 |
| Expectations Index | 86.3 | 81.7 | -4.6 |
Additional factors contributing to the decline include growing concerns over jobs and inflation. The share of consumers who viewed jobs as plentiful fell to 30.9%, while those finding jobs hard to get rose to 18.3%. Inflation expectations also increased, with a 5.2% rise anticipated over the next 12 months.
As *september consumer confidence falls the most in three years*, economic news reveals that the present situation measure worsened by 10.3 points to 124.3, and the expectations index dropped by 4.6 points to 81.7. These figures indicate a potential recession as a reading below 80 on the expectations index typically suggests. While the proportion of consumers foreseeing a recession remains low, there is a slight increase among those believing the economy is already in a recession.
Implications for Consumer Spending and Economic Outlook
The recent drop in consumer confidence has significant implications for both consumer spending and the broader economic outlook. As confidence wanes, individuals may become more reluctant to spend on high-cost items and non-essential services. This trend was evident in the October Consumer Confidence Index, which fell to 102.6 from its September level of 104.3.
Effects on Consumer Spending
With decreased optimism regarding income growth and business conditions, consumers have shown increased caution. The Present Situation Index similarly declined to 143.1 from 146.2. This hesitation is also reflected in a lower percentage of consumers viewing business conditions as “good,” which dropped to 19.1% in October from 21.0% in September. Consequently, these factors are likely to restrain consumer spending and affect sectors heavily reliant on discretionary expenditures such as electronics, appliances, and real estate.
Recession Fears and Economic Outlook
Recession fears are intensifying, as indicated by the Expectations Index, which dipped further to 75.6 in October. This consistent level below the recession threshold of 80 highlights a pervasive pessimism about future economic conditions, including job availability and personal income prospects. For instance, only 18.3% of consumers felt business conditions were “bad” in September—a figure that rose to 18.3% in October.
Such sentiments could significantly influence the broader economic outlook. Total household debt hitting a record $17.8 trillion, coupled with rising credit card debt and declining personal saving rates, underscores the precarious financial landscape. While Q2’s annualized GDP growth of 2.8% offers a sliver of optimism, the underlying consumer sentiment suggests ongoing challenges.
Overall, the combination of diminished consumer confidence, elevated recession fears, and cautious consumer spending trends suggests that businesses and policymakers will need to brace for potential economic slowdowns. As the Federal Reserve continues to adjust interest rates, a keen eye on these consumer sentiment indicators will be crucial for navigating the complex economic terrain ahead.
Market and Financial Trends
September’s drop in consumer confidence has had a profound impact on market analysis and financial trends. This decline, illustrated by The Conference Board’s consumer confidence index, which fell to 98.7 from 105.6 in August, serves as a significant indicator of broader economic sentiments. Consumers aged 35 to 54 and those earning less than $50,000 experienced the largest dip in confidence, influencing their economic outlook and spending behaviors.
The impact on the Federal Reserve’s policies has been notable, as their decision to adjust interest rates plays a critical role in shaping these financial perspectives.
Stock Market Expectations
The decreased consumer confidence suggests mixed stock market expectations. A portion of consumers anticipates a decline in stock prices, while others expect stability despite the downward trend. The recent financial market rally appears more fragile, raising concerns among analysts. This sentiment is reflected in the Present Situation Index, which dropped to 124.3 from 134.3 in August, and the Expectations Index, which fell to 81.7 from 86.3.
Federal Reserve and Interest Rates
Analysts have identified a direct correlation between declining consumer confidence and the Federal Reserve’s economic policies. Following the Federal Reserve’s decision to cut key lending rates, the shift in expectations around future interest rates has become evident. Now, fewer consumers foresee higher interest rates, leading to potential adjustments in investment strategies and financial market trends. This adaptation could influence broader financial trends, particularly as the consumer base adapts to the new economic policies.
Conclusion
In summary, the sharp decline in September’s consumer confidence signifies a pivotal moment in economic sentiment, with potential consequences for consumer spending, market trends, and the overall economic outlook. The consumer confidence index fell dramatically to 98.7 in September from 105.6 in August, marking the biggest month-to-month decline since August 2021. This downturn is highlighted by a notable drop in short-term expectations for income, business, and the job market, which fell to 81.7 from 86.3 in July.
Several factors contribute to this observed dip in consumer sentiment, including labor market concerns, fluctuating inflation rates, and evolving interest rates. Although employers added 142,000 jobs in August and 89,000 in July, the unemployment rate decreased marginally to 4.2%. However, the U.S. economy added 818,000 fewer jobs from April 2023 through March this year than previously reported. These labor market fluctuations inevitably impact consumer sentiment.
Additionally, while inflation has notably dropped from 9.1% to 2.5% in August, closer to the Federal Reserve’s 2% target, the Fed has responded by cutting its benchmark borrowing rate by 50 basis points to approximately 4.8%. The anticipation of further rate cuts in 2025 and 2026 also plays a crucial role in shaping economic indicators. Overall, the consumer outlook on current conditions fell to 124.3 in September from 134.3 last month, emphasizing heightened consumer concerns and economic stability.
As the country approaches a presidential election amidst these fluctuating confidence levels, the implications for economic stability and policy response remain critical areas of focus. The findings from The Conference Board underscore the need for continuous monitoring of consumer trends and market analysis, as they provide valuable insight into the nation’s economic health and trajectory. As economic indicators continue to evolve, stakeholders must remain vigilant and responsive to changes in consumer sentiment.