The Conference Board’s Consumer Confidence Index fell 6.7 points to 81.9 in September, its lowest reading since April 2014. Economists polled by Dow Jones had expected 89. August’s number was 88.6.
The University of Michigan’s survey told a similar story. Its sentiment gauge fell 7% in September, reaching its second-lowest reading on record. Two separate surveys delivered one message: households are worried about what things cost.
Prices at the Pump, Pressure at Home
The Conference Board’s Present Situation Index dropped 7.9 points to 109.3. Its Expectations Index, which measures the six-month outlook, fell 5.9 points to 63.6. For the first time in the history of one survey question, more respondents described their personal finances as bad rather than good.
Fuel costs loomed large. “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,” said Dana Peterson, the Conference Board’s chief economist. She added that consumers’ assessments of current business conditions turned negative for the first time since September 2024.
Regular gasoline averaged $4.46 a gallon. Appliance, car-repair and wireless-phone-service prices also rose in August. Respondents’ average inflation expectation climbed 0.3 percentage points to 6.1%, and the median rose 0.3 points to 5.1%. The survey drew responses from September 1-23, as uncertainty over the Iran war showed up in rising Treasury yields and mortgage rates.
Inflation, the Fed and Paychecks
The government’s own figures help explain the mood. The consumer price index rose 3.4% in August from a year earlier, the Labor Department said Friday, matching July’s annual rate. Month over month, prices rose 0.4%, four times July’s 0.1% increase.
The personal consumption expenditures price index, the Federal Reserve’s preferred gauge, rose 3.7% in June from a year earlier. That’s down from May’s 4.1%, but well above the 2.8% reading before the Iran war began on Feb. 28. It stood at 2.5% when President Donald Trump took office in January 2025. Trump has continued to blame high prices on his predecessor, Democrat Joe Biden, even as inflation has risen since he took office.
The Fed raised rates by a quarter point two weeks before the reports, its first increase since 2023. The benchmark rate now sits at about 3.9%, and the central bank signaled another hike could come later this year. That move could eventually increase borrowing costs for mortgages, auto loans and credit cards, leaving households squeezed by prices facing costlier credit, too.
Wages aren’t keeping pace. Average hourly wages rose 3.1% from a year earlier, the weakest annual increase since May 2021. That’s below August’s inflation rate of 3.4%.
A Labor Market Losing Momentum
The jobs picture has softened, though it isn’t broken. Employers added 162,000 jobs in August, ending a summer of weak hiring, while unemployment held at 4.1%. Some of that low rate could reflect people who gave up their job searches in previous months. The gap between respondents calling jobs “plentiful” and those calling them “hard to get” narrowed by 2.5 percentage points to 1.7%.
Job openings fell by 256,000 in August to 7.08 million, below Wall Street’s 7.2 million consensus. Professional and business services and health care-related jobs saw sharp declines. Hires edged higher, quits changed little and layoffs fell slightly. Consumers still rated the labor market positively and generally expected household incomes to rise, though not as much as before. The government is scheduled to release its September jobs report Friday and August PCE data Wednesday.
Why This Matters:
Consumer spending drives most of the U.S. economy, and households that feel poorer tend to pull back. With inflation at 3.4%, wages up 3.1% and the Fed raising rates, families are losing purchasing power while borrowing gets pricier. That’s a difficult mix for central bankers trying to tame prices without choking off growth. Fuel costs tied to the Iran war add an outside shock that policymakers can’t easily control. Inflation expectations of 6.1% matter, too, because expectations can feed into pricing and wage decisions. From a market-minded view, the data sharpens a question for Washington and the Fed: how to restore price stability while leaving room for private-sector hiring and investment.