U.S. consumer confidence fell sharply in September to its weakest level since 2014, adding another warning sign for an economy confronting higher energy costs, stubborn inflation and renewed monetary tightening.
The Conference Board’s Consumer Confidence Index dropped 6.7 points to 81.9 from a revised 88.6 in August, substantially weaker than economists had expected. The decline was broad: the Present Situation Index, which measures consumers’ assessment of current business and labor-market conditions, fell 7.9 points to 109.3, while the Expectations Index dropped 5.9 points to 63.6 for its third consecutive monthly decline.
The September reading was the lowest for the headline index since April 2014 and fell below the lows recorded during the COVID-19 pandemic. More important for markets, the deterioration was not confined to perceptions of the current economy. Consumers became more pessimistic about employment, incomes and business conditions over the next six months, increasing the risk that weaker sentiment eventually translates into softer discretionary spending.
The Expectations Index is now well beneath 80, a level the Conference Board has historically associated with elevated recession risk. That does not mean a recession is inevitable, particularly while employment and overall economic activity remain relatively resilient, but it makes incoming data on spending and hiring more important heading into the fourth quarter.
Inflation Pressure Is Hitting Consumers Again
The drop in confidence comes as households face another round of price pressure, particularly from energy. Consumer prices rose 0.4% in August after increasing just 0.1% in July, while year-over-year inflation remained at 3.4%, according to the Bureau of Labor Statistics. Gasoline prices increased 3.9% during the month and were 27.4% above their level a year earlier, while the broader energy index was up 16.3%.
Those increases are becoming difficult for consumers to ignore. Respondents to the Conference Board survey repeatedly cited gasoline and the broader cost of goods and services as sources of concern, while AAA reported the national average for regular gasoline at $4.48 per gallon on September 24, the highest level on record for that point in the year.
That creates a particularly uncomfortable mix for the consumer. Higher fuel prices directly reduce disposable income available for restaurants, travel, entertainment and other discretionary purchases, while also feeding into transportation and distribution costs across the economy. The Conference Board said consumers’ expected spending on services weakened again in September, with planned spending on areas including personal travel, airfare, movies and amusement parks moderating.
Labor-Market Confidence Is Also Weakening
The labor market has not collapsed, but consumers are becoming increasingly uneasy about where it is headed. Only 14.0% of respondents expected more jobs to become available over the next six months, down from 14.8% in August, while 28.4% expected fewer jobs, up from 26.1%. Expectations for household income deteriorated as well: 17.9% expected their income to increase, compared with 19.0% a month earlier, while the share expecting incomes to decline rose to 15.4%.
Those perceptions are weaker than the most recent headline employment figures might suggest. U.S. employers added 162,000 jobs in August and the unemployment rate held at 4.1%, according to the Labor Department, indicating that employment growth is continuing even as households become less confident about job availability.
The distinction will matter for consumer spending. Sentiment surveys can deteriorate without immediately producing a contraction in household purchases, particularly when employment remains stable. But sustained concern about job security and income can cause households to postpone large purchases, increase precautionary saving or trade down to cheaper goods and services before layoffs become widespread.
The Fed Now Faces a More Difficult Trade-Off
The September confidence report also arrives just after the Federal Reserve resumed monetary tightening. The Fed raised its target range for the federal funds rate by a quarter percentage point to 3.75%–4.00% in September, its first increase since 2023, saying inflation remained elevated even as economic activity continued to expand at a solid pace.
That creates a more complicated setup for monetary policy. Persistent inflation, particularly if elevated energy prices continue filtering into consumer prices, gives the Fed reason to keep policy restrictive. At the same time, deteriorating confidence, weaker household spending intentions and a less optimistic labor-market outlook raise the risk that additional rate increases could accelerate a consumer slowdown.
Financial markets reflected some of that tension Tuesday. U.S. stocks finished modestly lower, with the S&P 500 declining 0.17%, the Dow Jones Industrial Average falling 0.26% and the Nasdaq Composite slipping 0.09%. The broader market reaction was restrained because weaker economic data can also reduce expectations for additional Fed tightening, leaving investors caught between concerns about slowing growth and the possibility of a less aggressive rate path.
September’s confidence report does not establish that consumer spending is about to contract, but it strengthens the case for watching household demand more closely. The next major tests will come from incoming inflation, retail-spending and employment data, which will show whether the deterioration in sentiment remains largely psychological or is beginning to translate into weaker economic activity.
For markets, that distinction will increasingly shape the Fed debate: continued inflation alongside resilient spending could support additional tightening, while evidence that consumers are pulling back would make further rate increases more difficult to justify.