US Consumer Confidence Hits 81.9, Lowest Since 2014

Conference Board confidence fell to 81.9 in September, missing the 89.2 forecast, as fuel costs, Iran war worries and job fears weighed on households.

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US consumer confidence fell to its weakest level in 12 years in September, with the Conference Board's index dropping 6.7 points to 81.9 from a revised 88.6 in August. Economists had forecast a reading of 89.2. Survey responses were collected through September 23, a window that included the Federal Reserve's first rate increase since 2023 and the seventh month of the Iran war.

The Present Situation Index fell 7.9 points to 109.3. The Expectations Index, which tracks the short-term outlook for income, business and the labor market, slid 5.9 points to 63.6.

What Happened to Consumer Confidence in September?

The decline was broad. Consumers rated current business conditions as negative for the first time since September 2024. Those calling conditions "bad" rose to 20.4% from 17.3%, while those calling them "good" slipped to 18.5% from 18.8%.

Mentions of prices, the cost of goods and services, and oil and gas in particular reached new highs in the survey. Average one-year inflation expectations rose 0.3 points to 6.1%, with a median of 5.1%.

The survey also showed a growing share of households expecting a slowdown. The proportion of respondents expecting fewer jobs over the next six months rose to 28.4% from 26.1%. Those expecting a decline in income rose to 15.4% from 13.5%.

Why Are Fuel Prices Driving the Slump?

Fuel is the most direct channel from the Iran war to household budgets. Gasoline averages roughly $4.50 a gallon. Diesel, which was about $3.75 at the end of February, has set a record above $6.50, raising freight and food delivery costs.

Brent crude traded above $105 a barrel on Tuesday. That is up about 16% over the past month and roughly 60% from a year earlier. The conflict has repeatedly disrupted Gulf supply routes, and hopes of a deal to end the war have not held.

Energy is the item households notice most often and cannot easily cut back on. It also feeds into goods prices through transport and input costs, which keeps inflation expectations elevated.

Are Job Fears Adding to the Pressure?

Yes. The labor market differential, which compares the share of consumers saying jobs are plentiful with those saying jobs are hard to get, narrowed by 2.5 points to +1.7. It is the weakest reading since February 2021.

Consumers saying jobs are "plentiful" fell to 23.6% from 24.5%. Those saying jobs are "hard to get" rose to 21.9% from 20.3%. Households are pairing higher living costs with weaker confidence in job security. That combination tends to hold back discretionary spending, which drives most of US growth.

How Do Interest Rates Fit Into the Picture?

Rising borrowing costs are a further drag. On September 16 the Fed voted 12-0 to lift the federal funds target range by 25 basis points to 3.75%-4.00%, citing persistent energy and consumer price pressures. The median projection in the Fed's dot plot points to one more increase before year-end.

The Conference Board found 68.4% of consumers expect higher interest rates over the next 12 months, up 5.2 points. The survey signals that households now see tighter credit, not relief, in the months ahead.

Longer-term rates have moved further. The 10-year Treasury yield was about 5.24% on Tuesday. A five-year note auction cleared at 5.033%, the highest for that maturity since June 2006 and 64 basis points above the August auction. Higher yields raise mortgage, auto and card costs, and they amplify the effect of the Fed's tightening on household budgets.

Market Reaction

US stocks ended lower on Tuesday, with Treasury yields at multiyear highs adding to the pressure. The Dow Jones Industrial Average fell 131.59 points, or 0.26%, to 51,349.92. The S&P 500 slipped 0.16% to 7,670.84, and the Nasdaq Composite eased 0.09% to 26,797.54.

The moves were modest, which reflects how much of the weakness in sentiment was already visible in bond and oil markets. Equities have held near record territory, and the survey's stock-price expectations, while still positive for a majority of respondents, moderated.

What Comes Next for Households and the Fed?

The confidence reading complicates the policy path. Weaker sentiment and softer labor perceptions argue for restraint, but inflation expectations near 6% and energy-driven price pressure keep the Fed's bias toward higher rates. The next tests are the September jobs report and the price data due in October, along with the trajectory of crude oil.

Consumer spending has so far held up better than sentiment. A sustained pullback would shift the risk from inflation toward growth, and the survey's expectations gauge, at 63.6, sits well below the level that has historically signaled recession risk.

Outlook

Consumer confidence at 81.9 places households at their most pessimistic since 2014. Fuel prices, higher interest rates and job insecurity are all pointing the same way. Direction from the Iran war, oil markets and the Fed's next move will determine whether sentiment stabilizes in the fourth quarter or the weakness begins to show up in spending.