Consumer Confidence Declines Sharply in September

The Conference Board's Index of Consumer Confidence fell 6.5% (-5.4% y/y) to 98.7 during September following a 3.6% August rise, revised from 1.4%. It was the lowest level of confidence in three months. The Action Economics Forecast Survey expected a 2.5% increase to 103.0. Consumer confidence has been fluctuating between 97.5 and 114.0 over the past two years.

Both components of the index fell sharply this month. The present situation index declined 7.7% (-15.0% y/y) to 124.3 after rising 1.1% in August to 134.6, revised from 134.4. The expectations index fell 5.3% (+6.9% y/y) in September to 81.7 after rising 6.4% in August to 86.3, revised from 82.5.

The percentage of respondents assessing business conditions as “good” declined in September to 18.8% from 21.1% in August, while the percentage assessing conditions as “bad” rose to 20.2% from 17.3% in August.

The appraisal of labor market conditions deteriorated further in September as 30.9% of respondents thought jobs were plentiful, down from 32.7% in August. The measure has been declining since February. Jobs were viewed as hard to get by 18.3% of respondents this month and this measure has risen steadily this year from 11.0% in January. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) fell to 12.6%, down from a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations over the next six months were mixed in September. A fairly steady 19% of respondents expect business conditions to improve over the next six months, while 16.6% expect them to worsen, up from 14.5% in August. On employment, 16.4% expect jobs to increase over the next six months, versus 16.3% last month, while 18.3% expect the number of jobs to decline versus 17.0% in August. Regarding income, 18.0% expect it to increase, versus 18.6% in August while 13.0% expect it to decrease, up from 11.7% last month.

Inflation expectations over the next twelve months rose to 5.2% in September from a four-year low of 5.0% in August. Interest rates are expected to fall over the year with the percentage expecting a decrease rising to 33.3% from 32.3%. By contrast, the percentage of respondents expecting equity prices to increase over the next twelve months eased slightly to 47.6% from 47.9%, while the percentage expecting a decline fell to 25.0% from 26.5%.

Consumer spending plans over the next six months rose in September with the percent planning to buy a home surging to 5.7%, its highest level since August of last year. Plans to purchase an automobile edged up to 11.6% from 11.5% in August.

The Consumer Confidence data are available in Haver’s CBDB database. The total indexes, which are indexed to 1985=100, appear in USECON, and market expectations are in AS1REPNA.

Recent Views on Monetary Policy and the Economic Outlook from Federal Reserve Governor Michelle W. Bowman are available here.