New data from the Conference Board shows U.S. consumer confidence has sunk to its lowest in over ten years, as Americans contend with stubborn inflation, escalating borrowing costs, and apprehensions about slow job growth.
Economic headwinds drive confidence to lowest since 2008 crash
This month, the Conference Board reported Tuesday a sharp drop in its consumer confidence index by 6.7 points—reaching 81.8, down from 88.6 in August. Such a low point hasn’t been seen since right after the 2008 financial crisis. This downturn is fueled by the pinch of higher fuel prices, rising borrowing costs, and continued employment uncertainty.
The board’s nonprofit survey showed that expectations for inflation in the next 12 months have jumped noticeably, as consumers now estimate a median inflation rate of 5.1%, which is a rise of 0.3 percentage points month-over-month. The share of respondents who believe interest rates will increase within a year shot up by 5.2 percentage points to 68.4%, reflecting intensifying worries over access to credit.
According to Heather Long, chief economist with Navy Federal Credit Union, “Consumers are more disgruntled and squeezed in this economy than they felt during the 2020 pandemic.” She highlighted that day-to-day cost increases and limited hiring opportunities are weighing heavily on many middle-class Americans.
Federal Reserve projects inflation target years away
On the policy front, John Williams, President of the New York Federal Reserve, addressed inflationary challenges in a speech on Tuesday. He predicted that the Federal Reserve won’t reach its 2% inflation target until 2028, indicating that high prices may persist for an extended period. Williams expects inflation to finish 2026 at 3.5%, stay just above 2% throughout 2027, and then finally meet the target two years later.
Williams, vice chair of the central bank’s Federal Open Market Committee, also indicated there’s no immediate need for more rate hikes after the September quarter-point move. He explained, “With the policy action we took at our September meeting, there is no need for urgency, and we have time to gather more information.” Williams added that additional economic data will offer “greater clarity on the underlying trends.”
This cautious approach from the Federal Reserve, and Williams’s comments, sparked a shift on Wall Street. Traders who bet on interest rate futures cut the probability of another rate increase at the central bank’s Oct. 28 meeting to 47%, a drop from 71% only a day earlier, according to CME Group’s FedWatch tool.
Rising anxiety among both consumers and businesses over inflation
It’s not only households that feel uneasy about inflation. Before the Federal Reserve’s recent meeting, the National Association for Business Economics found that 49% of its members considered current monetary policy overly accommodative—a leap of 38 percentage points from their February survey. Additionally, the association noted that almost 95% of its members don’t anticipate inflation to reach the 2% goal until at least the second half of the coming year.
On the topic of household budgets, Conference Board chief economist Dana Peterson observed that participants in their survey increasingly mentioned the soaring price of goods and services—with oil and gas prices “rising to new heights” after September’s fuel price spike. The Conference Board’s survey results matched those from the University of Michigan, where consumer sentiment dropped to its lowest in four months and personal financial expectations decreased by about 10%, as inflation worries intensified.
In addition to high fuel prices, the threat of renewed trade tensions has darkened households’ near-term business outlook, as both short- and long-term inflation expectations continue to rise.
Outlook: Lingering uncertainty tempers hopes for recovery
While the Federal Reserve maintains its pledge to fight inflation, Americans remain uneasy, facing burdensome costs of everyday goods and unpredictable jobs. With the year drawing to a close, families and policymakers are preparing for a lengthy challenge against inflation, hoping for a gradual improvement in consumer confidence.