US consumer confidence plummets amid economic concerns

California: In a concerning shift, US consumer confidence took a sharp decline in September, marking the largest drop in over three years, as reported by the Conference Board on Tuesday. The consumer confidence index fell to 98.7, down from 105.6 in August, reflecting the steepest monthly decrease since August 2021. Analysts had anticipated a more favourable reading of 104, while the index stood at 132.6 just before the COVID-19 pandemic began in February 2020.

All five components of the index showed a downward trend, with the most significant drop observed among individuals aged 35-54 earning less than $50,000. Dana Peterson, chief economist at The Conference Board, noted that consumers’ evaluations of current business conditions turned negative, and their outlook on the labor market also worsened. There was a notable decrease in optimism regarding future business conditions and income.

The last substantial decline in the confidence index coincided with the onset of inflationary pressures, which later reached levels not seen in over 40 years.

Following the release of the report, stocks experienced some fleeting losses, while Treasury yields decreased. The present situation measure fell by 10.3 points to 124.3, and the expectations index dropped 4.6 points to 81.7. Notably, an expectations reading below 80 often signals a potential recession.

Concerns among respondents primarily revolved around job availability and inflation. The percentage of consumers perceiving ample job opportunities decreased to 30.9 percent, down from 32.7 percent in August, while those considering jobs "hard to get" rose to 18.3 percent, up from 16.8 percent. Additionally, the inflation outlook for the next 12 months increased to 5.2 percent, with rising prices becoming a primary economic worry.

While the proportion of consumers anticipating a recession in the next year remained low, there was a slight increase in those who believe the economy is already in a recession, according to Peterson.

This survey was conducted prior to the Federal Reserve’s recent decision to lower benchmark interest rates by half a percentage point, the first rate cut in four years, aimed at addressing inflation concerns and the softening labour market. The survey period ended on September 17, just before the Fed's announcement.