US consumer confidence fell sharply in September, to its lowest level since May, according to data released Tuesday by The Conference Board. The decline was fueled by concerns about rising energy costs and inflation, as well as the ongoing political and economic uncertainty.
The Conference Board Consumer Confidence Index fell to 95.7 in September, from 106.1 in August. The Expectations Index, which measures consumers' outlook for the next six months, fell to 78.2, from 80.2 in August.
"Consumers continued to be preoccupied with rising prices in general, and for groceries and gasoline in particular," Conference Board Chief Economist Dana Peterson said in a statement. "They also expressed concerns about the political situation and higher interest rates."
The decline in consumer confidence was notable among those with household incomes of $50,000 or more, the Conference Board said.
The drop in consumer confidence is a worrying sign for the US economy, as consumer spending accounts for about two-thirds of economic activity. If consumers become more pessimistic about the future, they are likely to cut back on spending, which could lead to a slowdown in economic growth.
The decline in consumer confidence comes at a time when the Federal Reserve is aggressively raising interest rates in an effort to combat inflation. The Fed has raised its benchmark interest rate 11 times since March 2022, and it is expected to continue raising rates in the coming months.
While higher interest rates are necessary to bring inflation under control, they also make it more expensive for businesses to borrow money and for consumers to buy homes and cars. This could also lead to a slowdown in economic growth.
The combination of rising energy costs, inflation, and higher interest rates is putting a strain on US households. If consumer confidence continues to decline, it could pose a significant risk to the US economy.
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The decline in consumer confidence is particularly concerning given the strength of the US labor market. The unemployment rate is at a near-50-year low, and job growth has been robust. However, the high cost of living is eating into consumers' disposable incomes, and many households are starting to feel the pinch.
If consumer confidence continues to decline, it could lead to a slowdown in consumer spending. This would be a major blow to the US economy, as consumer spending is the engine of economic growth.
The Federal Reserve is in a difficult position. It needs to raise interest rates to combat inflation, but it also needs to avoid raising rates too high, which could trigger a recession. The Fed will be closely monitoring consumer confidence in the coming months to gauge the impact of its rate hikes.
The US government also has a role to play in supporting consumer confidence. The government can take steps to help reduce the cost of living, such as providing tax breaks for middle-class families and investing in affordable housing. The government can also work to reduce uncertainty by addressing the political and economic challenges facing the country.
The decline in consumer confidence is a serious concern, but it is not too late to take action to turn things around. By working together, the government, businesses, and consumers can weather the current storm and build a stronger economy for the future.
