September Consumer Confidence Plummets to Lowest Level in Three Years Amid Growing Economic Concerns

Consumer confidence in the U.S. saw a sharp decline in September 2024, marking the largest drop in over three years. The Conference Board's Consumer Confidence Index fell to 98.7, down significantly from August’s 105.6. This steep fall reflects growing anxiety about labor market conditions, wages, and overall business sentiment as Americans become increasingly uncertain about the economy's future.

The Present Situation Index, which gauges consumers' perceptions of current business and labor conditions, dropped by over 10 points to 124.3, signaling a more pessimistic view of the economy's health. Meanwhile, the Expectations Index, which measures short-term economic outlooks for income and job availability, fell to 81.7, its lowest reading since 2021. Although the expectations figure is above the critical threshold of 80—often seen as a recessionary signal—analysts still believe the economic outlook is uncertain.

🚨 BREAKING: Consumer confidence falls the most in three years

Small businesses rely on strong consumers, but under the Biden-Harris Administration, Americans are facing rising prices, constant uncertainty and now falling confidence.https://t.co/ZfXletEDia

— House Committee on Small Business (@HouseSmallBiz) September 24, 2024

This dip in confidence was most pronounced among those aged 35 to 54, who showed the greatest decline in sentiment. The group also saw their confidence levels drop on a six-month average, while younger Americans, particularly those under 35, remain relatively optimistic. Analysts attribute the widespread dip in confidence to persistent concerns about inflation, job security, and rising interest rates​.

Another key factor driving this decline is the labor market, where signs of cooling are emerging. While unemployment remains low, there have been fewer job openings and reduced hours for some workers, which has raised concerns. Despite these challenges, the labor market still appears relatively healthy, with few layoffs reported, but confidence in continued wage growth has weakened. As a result, consumers are increasingly cautious about their economic prospects​.

For consumers making more than $125k, confidence is at its highest since this past January … for those making $15k-$24.9k, confidence is at its lowest since February 2021 pic.twitter.com/M4g2QdReVX

— Kevin Gordon (@KevRGordon) September 24, 2024

Moreover, inflation continues to weigh heavily on American households, despite a general slowdown in price increases. In September, inflation expectations among consumers rose slightly to 5.2%, though still below the 7.9% peak observed in March 2022. Inflation concerns remain prevalent, with consumers frequently citing rising prices in sectors like housing and energy as key reasons for their economic unease.

One notable shift has been in consumers' expectations for interest rates. For the fourth consecutive month, fewer Americans now expect interest rates to rise over the next year. Only 46.5% of respondents anticipate higher rates, the lowest level recorded since February 2024. In contrast, the share of people expecting lower rates has increased, reflecting cautious optimism that the Federal Reserve's aggressive rate hikes might be nearing an end​.

Despite the economic challenges, stock market expectations among consumers have remained relatively stable. The proportion of people expecting stock prices to rise in the next year dropped slightly to 47.6%, while 25% expect the market to decline, suggesting a more cautious but steady outlook for financial markets​.

The drop in consumer confidence comes at a critical time as businesses and policymakers assess how ongoing inflation, rising borrowing costs, and a softening labor market might impact broader economic growth. While the U.S. economy has shown resilience in the face of multiple headwinds, the latest figures highlight growing anxiety among Americans. If consumer confidence continues to erode, it could signal deeper economic troubles ahead, particularly if inflation and labor market challenges persist into 2025.