Consumer Confidence Report Hits Second Lowest Level This Year

Key Takeaways

• The Consumer Confidence Index has dropped from 108.7 last month to hit 103, the second lowest level of the year
• The latest figures also came in below the expected number of 106.2
• It shows that the general public are feeling more worried about the current state of the economy, with inflation ticking back up and more potential Fed rate hikes on the cards

Consumer confidence has dropped again, with the index coming it at 103 for the month of September and narrowly missing this year’s low of 102.5 from back in May. After a run of positive results in the Fed’s fight against inflation, consumers were understandably feeling a little more relaxed over recent months.

But with the latest inflation figures coming in above expectations and the annualized rate creeping up, there are now concerns that the Fed will need to continue to raise rates further.

This comes at a time when the average 30 year fixed mortgage rate has hit its highest level in over 20 years at 7.51%.

Consumer confidence report comes in below expectations

The final figure for September from the Conference Board Consumer Confidence Index has come in at 103, down from 108.7 from August and below the 106.2 which had been expected.

There are a wide range of pieces of economic data that explain the situation, with many Americans feeling more anxious about the future.

The labor differential, which measures consumers’ attitude towards jobs and whether they are “plentiful” or “hard to get” fell to 27.3 in September, down from over 45 at the beginning of last year. The figure has been falling consistently, showing that widely reported layoffs and corporate efficiency measures aren’t just clickbait headlines.

But it’s not just about the job market, as the chief economist from the Conference Board, Dana Peter, said in a statement, “Consumers also expressed concerns about the political situation and higher interest rates. The decline in consumer confidence was evident across all age groups, and notably among consumers with household incomes of $50,000 or more.”

How the market reacted

Wall Street has had a rough week so far, and these latest consumer confidence figures haven’t helped the situation.

The S&P 500 was down 1.47% yesterday, bringing the total slide 4.03% over the past five days. The Nasdaq Composite is under similar pressure, falling 2.72% over the past five days and 1.57% yesterday.

Meanwhile, bond yields have climbed to their highest levels since 2008, which is accompanied by a drop of over 50% in the S&P 30-Year Treasury Bond Index since 2020.

While that paints a fairly dire picture, equity markets have managed to claw back some of the significant losses experienced in 2022. The S&P 500 is up 17.17% over the past 12 months, while the Nasdaq Composite has gained over 20%.

The bottom line

Consumer confidence is down, which is generally pretty understandable given the overall economic picture right now. After looking like we may be at the end of the current rate rise cycle, inflation has started to tick up again meaning the Fed may need to continue to hike.

For consumers who are continuing to play catch up with cost of living pressures, and ever increasing mortgage and loan rates, it’s not hard to see why confidence might be hit.

Investors need to keep in mind that business and the economy is cyclical in nature, and that as long as they are investing for the long term, in a diversified way, returns are likely to come eventually.