U.S. consumer confidence experienced its sharpest decline in three years, signaling growing concerns about the economic outlook. The drop reflects rising uncertainties surrounding inflation, job stability, and future economic growth.
The Conference Board’s consumer confidence index dropped to 98.7 in September, down from 105.6 in August, missing the 104 forecast in a Bloomberg survey. Dana Peterson, Chief Economist at The Conference Board said:
“September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further.”
The Conference Board’s Consumer Confidence Index is based on a monthly survey of about 3,000 households and assesses consumers’ views on current economic conditions as well as their expectations for the future.
The sharp decline suggests that consumers are becoming more cautious, potentially signaling slower economic growth in the months ahead. This dip could also affect retail spending, which is a key driver of the U.S. economy.
See Related: Wall Street Rises As Key Consumer Confidence Gauge Shows Gains
Benchmark Fed Funds Rate
This negative news came after the Federal Open Market Committee lowered the benchmark Fed funds rate to a range of 4.75% to 5% last week, the first reduction since March 2020, signaling confidence in the progress made against inflation.
Fed officials stated last week that inflation is no longer a pressing threat, giving them more flexibility to focus on other economic goals, such as boosting employment and encouraging investment.
However, on Tuesday, Governor Michelle Bowman advocated for a gradual loosening of monetary policy, diverging from the prevailing stance of the Federal Open Market Committee. She noted that inflation is still a concern despite recent improvements and suggested that the labor market may not be as weak as the data implies.
It is also important to mention that Bowman was the only dissent to the FOMC’s decision to lower the target range for the federal funds rate by 50 basis points at its meeting last week.
