Consumer optimism slides sharply as fears escalate over rising prices and jobs

• The Present Situation index dropped 7.9 points to 109.3, while the six-month Expectations Index fell 5.9 points to 63.6, indicating worsening near-term and future outlook.
• Average inflation expectations rose to 6.1% (up 0.3 points), driven by surging fuel costs related to Iran war uncertainty, while the job market 'plentiful vs. hard to get' differential narrowed to just 1.7%.
• Job openings declined to 7.08 million in August (below the 7.2 million forecast), with sharp drops in professional services and healthcare sectors, though hires increased slightly and layoffs fell modestly.

Consumer Confidence Plummets Amid Inflation and Labor Market Concerns

The Conference Board's Consumer Confidence Index dropped sharply to 81.9 in September, falling 6.7 points and missing the consensus estimate of 89. This decline reflects mounting consumer anxiety over persistent inflation and deteriorating labor market conditions.

Key Findings:

The Present Situation Index declined 7.9 points to 109.3, while the Expectations Index fell 5.9 points to 63.6. In a notable milestone, respondents citing "bad" personal finances outnumbered those citing "good" finances for the first time since the survey question's introduction four years ago.

Inflation remains the primary concern, with average inflation expectations rising 0.3 percentage points to 6.1%, and the median expectation increasing to 5.1%. Consumer commentary highlighted acute worries about fuel costs following September's surge in oil and gas prices, partly attributed to the Iran conflict.

Labor Market Weakness:

The jobs "plentiful" versus "hard to get" differential—a critical labor market indicator—narrowed by 2.5 percentage points to just 1.7%, signaling continued softening. Separately, August job openings fell to 7.08 million (below the 7.2 million forecast), with significant declines in professional, business services, and healthcare sectors. Hires edged slightly higher while layoffs decreased modestly.

Market Implications:

The sentiment decline mirrors the University of Michigan's consumer sentiment index, which posted its second-lowest reading on record with a 7% September drop. Financial markets have reflected this uncertainty through surging Treasury yields and mortgage rates. Chief economist Dana Peterson noted that consumer appraisals of current business conditions turned negative for the first time since September 2024, suggesting potential headwinds for consumer spending and economic growth.