American consumers grew markedly more pessimistic about the economy in September, with a closely watched confidence gauge falling to its lowest level in 12 years as rising fuel costs pushed inflation worries back to the forefront of household concerns.
The Conference Board reported Tuesday that its consumer confidence index dropped 6.7 points to 81.9, down from 88.6 in August. That badly missed forecasts: economists surveyed by The Wall Street Journal had expected the index to rise slightly, to 89.
It was the third straight monthly decline, with Americans souring on both current conditions and the outlook for the months ahead.
“The Consumer Confidence Index deteriorated notably in September, following two prior months of softening,” said Dana M. Peterson, the Conference Board’s chief economist.
A measure of how people view current business and job conditions, the Present Situation Index, fell 7.9 points to 109.3. The Expectations Index, which tracks views on business, jobs and income over the next six months, slid 5.9 points to 63.6 — its third consecutive monthly drop.
Fuel Costs Drive the Mood Swing
Written comments from survey respondents made clear what was weighing on them most.
“References to prices, the high cost of goods and services, and oil and gas prices in particular, rose to new heights, reflecting September’s surge in fuel costs,” Peterson said.
Household finances took a hit in the numbers, too. More people described their family’s current financial situation as bad than good — only the second time that’s happened since the question was added to the survey four years ago.
Views on business conditions also turned negative for the first time since September 2024. Just over 20 percent called conditions bad, up from 17.3 percent, edging out the 18.5 percent who called them good.
Job Worries Rise Despite Low Unemployment
Perceptions of the job market softened as well. The share of people saying jobs were plentiful slipped to 23.6 percent from 24.5 percent, while those saying jobs were hard to find rose to 21.9 percent from 20.3 percent. The gap between those two figures — a common gauge of labor-market health — narrowed sharply to 1.7 percentage points from 4.2 points.
That pessimism is showing up even though the job market itself hasn’t weakened by the usual measures. Unemployment held steady at 4.1 percent in August, when employers added 162,000 jobs, according to the Labor Department. New unemployment claims fell to just 197,000 for the week ended September 19, a very low figure suggesting layoffs remain rare.
Still, consumers expect things to get worse. Some 28.4 percent think there will be fewer jobs over the next six months, about double the 14.0 percent who expect more. People are still more likely to expect their income to rise than fall, but that gap narrowed to 2.5 percentage points from 5.5 points in August.
Inflation Expectations Climb
Consumers now expect inflation to average 6.1 percent over the next year, and the median estimate came in at 5.1 percent — both up 0.3 percentage points from August.
The share of people who expect interest rates to rise over the next year jumped 5.2 percentage points to 68.4 percent. The survey was conducted from September 1 through September 23, a period that included the Federal Reserve’s first interest-rate increase in three years.
Confidence fell across party lines — among Republicans, Democrats and independents alike — and weakened across every age group and nearly every income bracket, based on six-month moving averages.
Spending Plans Pull Back — Mostly
Plans to buy homes and cars edged lower, and intentions to spend on services weakened again. People said they were cutting back on discretionary activities including hotel stays, airfare, movies and amusement parks.
One area held up: vacation plans. The share of people planning a trip in the next six months actually rose, to 42.6 percent from 42.1 percent, driven by stronger interest in domestic travel. Plans for trips abroad, however, declined.
