Rising costs for goods and fuel emerge as primary factors behind the sharp decline in consumer sentiment.
United States consumer confidence has dropped to its lowest level since 2014, occurring just over a month before the congressional midterm elections.
According to The Conference Board’s monthly report released on Tuesday, consumers identified increasing prices for goods and services as the main cause of the decline.
“The Consumer Confidence Index showed a significant deterioration in September, continuing the downward trend seen over the previous two months,” said Dana M M Peterson, chief economist at The Conference Board, in a statement accompanying the report.
Consumers specifically pointed to rising fuel prices as a major contributing factor. Data from the American Automobile Association (AAA) shows that the average price per gallon (3.78 liters) of gasoline increased by 37 cents over the past month, reaching $4.45 on Tuesday compared to $4.08 a month earlier.
“Oil and natural gas prices climbed to record levels during September, highlighting the recent surge in energy costs. Concerns about war and conflict decreased this month but remained high,” Peterson noted.
The consumer confidence report precedes Thursday’s release of the personal consumption expenditures (PCE) index, a key inflation measure closely watched by the Federal Reserve. The PCE price index rose 3.7% year-over-year in June.
In response to inflationary pressures, the US central bank implemented its first interest rate increase in three years earlier this month, affecting borrowing costs for credit cards, automobiles, and various loans. The Fed is scheduled to decide on further rate adjustments at its October 27-28 policy meeting, creating additional challenges for Republican lawmakers as consumer sentiment declines across party lines.
The Conference Board’s report indicates that confidence decreased among consumers of all political affiliations. This reading represents the second-to-last major consumer confidence measurement before the midterm elections, which will determine control of Congress.
A recent Marist poll found that 42% of Americans believe the Democratic Party would handle economic matters better than Republicans, while 34% expressed confidence in the Republican approach.
US stock markets closed slightly lower on the day, with the Nasdaq Composite down 0.08%, the Dow Jones Industrial Average falling 0.2%, and the S&P 500 declining 0.1%.