Consumers Continue to Lose Confidence in an Inflation-Racked Economy

Confidence in the U.S. economy slid further in September as consumers continued to worry about high interest rates, inflation and a possible recession, according to a report released Tuesday.

The Conference Board's Consumer Confidence Index fell to 103.0 from an upwardly revised 108.7 in August, and below the 105.5 consensus estimate from Dow Jones.

The board's expectations index, which measures consumers’ six-month outlook for income, business and labor conditions, is signaling a recession within the next year. It declined to 73.7, down substantially from 83.3 in August. Readings below 80 have historically been followed by a recession within a year, according to The Conference Board.

"Consumers continued to be preoccupied with rising prices in general, and for groceries and gasoline in particular," said Dana Peterson, chief economist at The Conference Board. "Consumers also expressed concerns about the political situation and higher interest rates."

The board's present situation index, which is based on consumers’ assessment of current business and labor market conditions, was slightly less pessimistic. It rose slightly to 147.1 from 146.7 last month. 

"Fewer consumers said that business conditions were good, but fewer also said they were bad," Peterson said. "Regarding the employment situation, slightly more consumers said that jobs were “plentiful."

Inflation has declined precipitously since hitting a peak of over 9% in June 2022, but it's still 3.7% as measured by the consumer price index. That's well-above the Federal Reserve's target of 2%.

The Fed has raised interest rates to a 22-year high to curb inflation. Its hikes have pushed mortgage rates to highs not seen in over 20 years. Rates on credit cards, auto loans and other forms of consumer credit are also soaring.

Meantime, the economy has been slowing, but growth remains well-above recessionary levels. The latest revision to send quarter gross domestic product – which last clocked in at 2.1% – will be released on Thursday.

Earlier this month, the University of Michigan's report on consumer sentiment showed a decline in optimism in September with consumers concerned about the trajectory of the economy. Those results will be updated on Friday.

The Consumer Confidence Index is a leading indicator used to predict consumer spending, which drives more than two-thirds of U.S. economic activity. It details consumer attitudes, buying intentions, vacation plans and consumer expectations for inflation, stock prices and interest rates.

The Conference Board is a think tank driven by public and private companies that has been providing business insights since 1916.