The feel-good vibes about a resilient US consumer and overall economy from the summer have cooled down.
In September, the Conference Board's Consumer Confidence Index declined to 103, down from 108.7 in August, according to data released Tuesday. That marked the largest monthly decline for the index since December 2020, according to Wells Fargo Economics.
The Expectations Index, which aggregates consumers’ short-term outlook for income, business, and labor market conditions, drove the overall decline. The Expectations Index sank to a reading of 73.7 in September, down from 83.3 in August and 88 in July.
Historically, any number below 80 signals a recession within the next year.
“Expectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about future business conditions, job availability, and incomes," Dana Peterson, the chief economist at The Conference Board, said. "Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to rise — making big-ticket items more expensive."
Peterson also highlighted in the release that the reaccelerating of inflation is likely on consumer's minds. Notably, food and gas prices have risen at a faster pace in recent data releases. Concerns about the Federal Reserve holding interest rates at higher levels for longer than initially anticipated as well as "political uncertainty" weighed on consumer confidence in September.
In aggregate, the long list of consumer concerns comes in line with the headwinds Wall Street economists and strategists have been highlighting in recent weeks. A combination of rising oil prices, a strike from auto workers, the resumption of student loan payments, and a potential government shutdown could all weigh on the American consumer in coming months, economists have said.
"Amid rising headwinds, the Conference Board’s consumer confidence measure notched a second consecutive monthly decline, reinforcing our expectations for a slowdown in consumption in Q4," Oxford Economics US economist Matthew Martin wrote in a research note after Tuesday's release.
Wells Fargo senior economist Tim Quinlan notes that consumer confidence and consumer spending haven't tracked in line with each other in the post-pandemic era as stimulus-filled bank accounts supported resilient spending.
That could change, though, as credit card delinquencies increase.
"With savings running dry and credit now scarce and costlier, the biggest monthly decline in consumer confidence since 2020 could be more impactful on actual spending," Quinlan wrote in a new note on Tuesday.
Josh Schafer is a reporter for Yahoo Finance.
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