In a notable shift from the positive outlook observed during the summer months, the Consumer Confidence Index in the United States experienced a substantial dip in September, dropping to 103 from August’s 108.7, as per data disclosed on Tuesday by the Conference Board. This decline marks the most significant monthly drop since December 2020, according to reports from Wells Fargo Economics.
The primary driver behind this downturn was the Expectations Index, plummeting to a reading of 73.7 in September, down from 83.3 in August and 88 in July. Traditionally, any figure below 80 has been viewed as a harbinger of an impending recession within the next year. Dana Peterson, Chief Economist at The Conference Board, voiced her concerns, stating, “Expectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about future business conditions, job availability, and incomes.”
Furthermore, Peterson drew attention to the resurgence of inflation as a significant factor preoccupying consumers. Recent data releases have shown a notable uptick in prices for essential items such as food and gasoline. Adding to the mounting worries were concerns about the Federal Reserve’s intention to maintain higher interest rates for an extended period, along with lingering “political uncertainty,” all of which weighed heavily on consumer sentiment in September.
This collective apprehension among consumers aligns with the challenges that Wall Street economists and strategists have been underscoring in recent weeks. Factors including escalating oil prices, an auto worker strike, the resumption of student loan payments, and the looming possibility of a government shutdown all present potential obstacles for the American consumer in the upcoming months, economists have cautioned.
Against this backdrop of mounting challenges, the Conference Board’s Consumer Confidence Index registered a second consecutive monthly decline, fortifying expectations for a slowdown in consumption during the fourth quarter, according to Oxford Economics US economist Matthew Martin. Wells Fargo Senior Economist Tim Quinlan pointed out an interesting trend, noting that consumer confidence and spending have not been moving in tandem in the post-pandemic era, largely due to the influx of stimulus funds that bolstered resilient spending. However, Quinlan warned that this dynamic might shift as credit card delinquencies rise. He stated, “With savings running dry and credit now scarce and costlier, the biggest monthly decline in consumer confidence since 2020 could be more impactful on actual spending.”
The recent slump in consumer confidence, coupled with the potential challenges on the horizon for US consumers in the fourth quarter, has prompted analysts to sound the alarm about a significant slowdown that could materialize in the months ahead. Nevertheless, the prospect of increased job gains, rising wage levels, and additional fiscal stimulus offers a glimmer of hope for the broader US economy and the American consumer in the forthcoming quarters.
Source: Yahoo Finance