U.S. Consumer Confidence Hits 12-Year Low as Gas Prices and Inflation Weigh on Households

American consumers are more downbeat about the economy than at any point in more than a decade, according to new data released Tuesday — a reading that came in far below what economists expected and that underscores how persistently high prices and a seven-month-old war in the Middle East are reshaping household sentiment.

The Conference Board's Consumer Confidence Index fell 6.7 points to 81.9 in September, its lowest level since April 2014 and below the lowest point recorded during the pandemic. Economists had forecast a reading of around 89. August's figure was itself revised down, from 89.4 to 88.6, meaning the deterioration is even steeper than the headline drop suggests.

The Consumer Confidence Index deteriorated notably in September, following two prior months of softening. The Present Situation Index fell sharply, while the Expectations Index slipped further into negative territory.— Dana M. Peterson, Chief Economist, The Conference Board

Both major sub-indexes declined. The Present Situation Index — which measures how consumers view current business and labor conditions — dropped 7.9 points to 109.3, against an economist forecast of 120.2. The Expectations Index, reflecting consumers' six-month outlook for income, business, and jobs, fell 5.9 points to 63.6, its third consecutive monthly decline, according to the Conference Board.

The survey, conducted September 1–23, captured responses during a period that included a federal funds rate hike and ongoing geopolitical tensions. The Federal Reserve raised its benchmark interest rate for the first time since 2023 — a quarter-point increase that lifted the key rate to about 3.9 percent — and signaled another hike could follow later this year, according to the Globe and Mail. Over time, that move could push up borrowing costs on mortgages, auto loans, and credit cards.

Energy costs sit at the center of the public's frustration. U.S. gasoline prices have surged since the Iran war began in late February, averaging $4.45 to $4.46 per gallon for regular as of Tuesday, compared with $3.13 a year ago, according to AAA data cited by Yahoo Finance. The Conference Board said references to oil and gas prices in consumers' write-in responses rose to new heights in September.

Consumers' write-in responses regarding factors affecting the economy were mostly pessimistic in September. 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. Comments about war/conflict eased this month but remained elevated. Consumers also frequently cited politics, trade, and employment in their write-in responses, though to a lesser extent.— Dana M. Peterson, Chief Economist, The Conference Board

Consumers' views of current business conditions turned negative for the first time since September 2024, with the net share saying conditions are 'good' versus 'bad' falling to –1.9 percent. The labor market differential — the share saying jobs are 'plentiful' minus those saying jobs are 'hard to get' — retreated to just +1.7 percent, though it remained in positive territory. Looking ahead, net expectations for business conditions fell to –9.5 percent and for the labor market to –14.4 percent.

Household finances are also under pressure. Consumers' net views of their family's current financial situation turned negative in September — only the second time that has happened since the question was introduced four years ago, according to the Conference Board. Average 12-month inflation expectations rose 0.3 percentage points to 6.1 percent, and the share of consumers anticipating higher interest rates over the next year jumped 5.2 percentage points to 68.4 percent.

The broader inflation picture adds context to the gloom. The consumer price index rose 3.4 percent in August compared with a year ago, with costs jumping 0.4 percent month-over-month — quadruple the 0.1 percent increase registered in July, according to the Globe and Mail. Average hourly wages rose just 3.1 percent year-over-year in August, the weakest such increase since May 2021, meaning real purchasing power continues to erode for many workers.

The pessimism was broad-based. On a six-month moving average, confidence fell across all age groups and nearly all income groups, and declined in September across all political affiliations — Democrats, Republicans, and Independents alike, the Conference Board reported. Those with household incomes of $125,000–$149,000 reported the greatest decline in confidence over the last six months. Younger generations — Gen Z and Millennials — remained the most confident, while Generation X, Baby Boomers, and the Silent Generation continued to weaken.

Spending intentions softened alongside sentiment. Plans to purchase autos and homes both declined slightly on a six-month moving average. Anticipated spending on discretionary services — hotels, airfare, movies, and amusement parks — moderated, though vacation plans held up slightly, with 42.6 percent of consumers planning a trip in the next six months, up 0.5 percentage points from August. That increase was limited to domestic travel; plans for international trips dipped.

The Conference Board's confidence reading carries political weight as well as economic significance. With U.S. midterm elections roughly a month away, the sustained erosion in consumer sentiment — set against five years of elevated inflation and wages that have not kept pace — presents a challenge for President Donald Trump and congressional Republicans, according to the Globe and Mail. Trump has continued to attribute high prices to his predecessor, Joe Biden, though inflation has risen since Trump's inauguration in January 2025, when the PCE inflation gauge stood at 2.5 percent. It was up 3.7 percent year-over-year as of June, the most recent reading available.

The government is set to release August personal consumption expenditures data Wednesday and the September jobs report Friday, both of which will offer the next read on whether the economic anxiety reflected in Tuesday's survey is translating into actual changes in spending and hiring.

Why it matters — With consumer spending driving roughly two-thirds of the U.S. economy, a confidence reading at a 12-year low — driven by war-fueled energy costs, renewed Fed rate hikes, and wages that aren't keeping pace with inflation — signals real risk of a pullback in household spending that could slow broader economic growth.

Reported by yahoo.com, finance.yahoo.com, reuters.com, morningstar.com, theglobeandmail.com