Consumer Confidence Falls to Its Lowest Level Since 2014 as 30-Year Yield Hits a 24-Year High
The Conference Board index dropped 6.7 points to 81.9, far below forecasts, as fuel costs and a Fed rate hike squeezed households.
American consumers are the gloomiest they have been in more than a decade. The Conference Board said Tuesday that its Consumer Confidence Index fell 6.7 points in September to 81.9, the lowest reading since 2014. Economists polled by Reuters had expected 89.2.
Both halves of the index dropped. The Present Situation Index, which reflects views of current business and job conditions, fell 7.9 points to 109.3. The Expectations Index, which measures the six-month outlook for income, business and labor conditions, slid 5.9 points to 63.6, its third straight monthly decline. A reading below 80 on the expectations gauge has historically signaled a recession within the next year, and this one sits well below that line.
"Consumers' write-in responses regarding factors affecting the economy were mostly pessimistic," said Dana Peterson, the Conference Board's chief economist. Mentions of prices, the cost of goods and services, and oil and gasoline hit new highs as fuel costs surged through the month. For the first time since the survey introduced the question four years ago, more respondents called their family's current financial situation "bad" than "good."
Inflation worries are climbing with it. The average 12-month inflation expectation rose to 6.1%, and the median reached 5.1%. About 68.4% of consumers expect higher interest rates over the next year, up 5.2 percentage points from August. The survey ran from Sept. 1 to Sept. 23, a stretch that included a Federal Reserve rate hike and continued tension over the Iran war and its effect on energy markets.
Wall Street felt the pressure through the bond market. The yield on the 30-year Treasury reached 5.62%, its highest since 2002, and higher borrowing costs weighed on stocks. The Dow Jones Industrial Average fell about 0.2%, the S&P 500 slipped about 0.1%, and the Nasdaq finished roughly flat. Job openings for August came in at 7.097 million, below what economists expected, adding to the sense that the labor market is cooling.
Oil offered a small counterweight. Brent crude hovered near $96 a barrel after Saudi Arabia resumed pipeline exports and U.S.-Iran talks restarted, well below the peaks seen earlier this month. Investors now turn to Micron Technology's earnings on Wednesday as a test of AI-driven chip demand, and to whether higher yields and weaker households start to show up in spending data.
Confidence surveys are imperfect predictors, and spending has sometimes held up even when sentiment sinks. But the drop was broad, with confidence falling across political affiliations and age groups for a third straight month. That makes it harder to dismiss as a partisan mood swing, and it puts more weight on the next round of retail sales and jobs data.
