Consumer confidence fell to its lowest level in five months during September 2025. The Conference Board’s index dropped 3.6 points to 94.2, down from 97.8 in August. Economists surveyed by Dow Jones had expected a reading of 96.0. The decline signals growing pessimism about employment prospects and broader economic conditions.
The Present Situation Index, which measures current business and labor market assessments, plunged 7.0 points to 125.4. That drop marked the largest monthly decline in a year. The Expectations Index, covering short-term outlooks for income, business conditions, and employment, decreased 1.3 points to 73.4. Expectations have remained below the recession-warning threshold of 80 since February 2025.
Stephanie Guichard, senior economist for global indicators at The Conference Board, noted the weakness across components. “Consumer confidence weakened in September, declining to the lowest level since April 2025,” she stated. “The present situation component registered its largest drop in a year.”
Job Market Appraisal Deteriorates
Consumer assessments of job availability fell for the ninth consecutive month, reaching a new multiyear low. Only 19.5% of respondents rated current business conditions positively, down from 21.8% in August. Those viewing conditions as “bad” increased 0.8 percentage points.
The persistent decline in job availability perceptions aligns with government data showing deterioration throughout 2025. While unemployment and layoffs remain historically low, mounting evidence suggests difficulty finding employment has increased. Job openings have declined steadily. Quit rates dropped, indicating workers feel less confident about securing new positions after leaving current roles.
University of Michigan consumer sentiment data confirmed the downward trend. Sentiment eased approximately 5% from the prior month, though remaining above April-May lows. The decline spread across age groups, income levels, education segments, and all five index components. One exception emerged: consumers with larger stock holdings maintained stable sentiment while those with smaller or no holdings saw decreases.
Political affiliation produced mixed results. Sentiment moved down roughly 9% for independents and 4% for Republicans. Democrats experienced slight increases. The Conference Board data showed confidence improved slightly among both Republicans and Democrats but dropped substantially among independents.
Inflation Concerns Resurface as Primary Issue
Write-in survey responses showed inflation mentions rose during September, reclaiming the top position among factors influencing economic views. References to tariffs declined from peak levels but remained elevated, continuing associations with higher price concerns. Consumers spontaneously mentioning high prices eroding personal finances reached 44%, the highest reading in a year.
Average 12-month inflation expectations ticked down to 5.8% in September from 6.1% in August. That level remains notably above the 5.0% reading at year-end 2024. Consumer price expectations run more than double actual inflation rates measured by government data. The Consumer Price Index stood at 2.7% annually in August.
Long-run inflation expectations moved up for the second consecutive month to 3.7% in September. The reading stands much lower than the 4.4% spike seen in April but reflects persistent concern about price pressures extending beyond the near term.
Government data released earlier in September showed inflation rose in August as gas, groceries, and airfare prices jumped. Consumer prices increased 2.9% year-over-year, up from 2.7% the previous month, marking the biggest increase since January. Excluding volatile food and energy categories, core prices rose 3.1%, matching July’s pace.
Purchasing Plans Show Mixed Patterns
Car buying intentions weakened notably. Plans to purchase both new and used vehicles declined during September. The softness aligns with recent struggles at major automotive retailers like CarMax, which reported disappointing earnings and significant stock declines.
Home purchasing plans jumped to a four-month high despite the overall confidence weakness. Mortgage rates fell to their lowest levels since October during the period, potentially encouraging prospective buyers. Consumer expectations for interest rate declines increased to 25.6% from 23.6% in August.
Big-ticket item purchasing plans showed little overall change with variations across categories. Some consumers delayed purchases of items like refrigerators and vacations. TV and smartphone buying intentions increased. The mixed signals suggest selective discretionary spending rather than broad retrenchment.
Stock market expectations shifted modestly. The share of consumers expecting stock prices to decrease over the next 12 months fell to 27.6% from 30.2% in August. Those anticipating higher stock values increased correspondingly. Investment-related sentiment provided one of the few bright spots in an otherwise gloomy report.
Personal Finance Perspectives Weaken
Consumer views of current and future family financial situations both deteriorated during September. Views of current financial circumstances recorded the largest one-month drop since data collection began in July 2022. Personal expectations softened alongside macroeconomic outlook declines, with dimming prospects for incomes and personal finances.
Consumers under 35 years old saw confidence rise while those over 35 experienced declines. Income group evolution followed mixed patterns with no clear trends emerging. Confidence remained above April lows for most consumer cohorts except households earning between $25,000 and $35,000 and those making above $200,000.
The divergence by age groups suggests younger consumers maintain optimism about career trajectories and earning potential. Older cohorts face greater concern about job security, inflation impacts on fixed incomes, and retirement planning adequacy amid market volatility.
Recession Worries Intensify
The share of consumers believing recession is very likely over the next 12 months rose slightly in September to the highest level since May. More respondents thought the economy had already entered recession. These measures do not factor into the Consumer Confidence Index calculation but provide supplementary insights into consumer psychology.
Expectations remaining below 80 since February signal sustained recession concerns according to historical patterns. Previous periods when expectations lingered below that threshold preceded economic contractions. Whether current weakness foreshadows actual recession or reflects exaggerated pessimism remains uncertain.
Federal Reserve officials monitor consumer confidence indicators as part of broader economic assessments. Spending accounts for roughly two-thirds of U.S. economic activity. Consumer willingness to spend drives growth or contraction depending on sentiment and financial capacity.
Boston Fed President Susan Collins acknowledged increased risks during a September 29 speech. “My baseline outlook doesn’t see the labor market softening much further, but there are risks,” she warned. “In particular, I see some increased risk that labor demand may fall significantly short of supply, leading to a more meaningful and unwelcome increase in the unemployment rate.”
Spending Behavior Defies Sentiment
Despite deteriorating confidence, consumer spending has maintained resilience. Retail sales increased 0.6% in August, beating economist estimates. Online retail drove some gains. The disconnect between sentiment and behavior creates analytical challenges for forecasters.
Consumers express pessimism in surveys while continuing to spend. Explanations vary. Some argue consumers overstate concerns while their financial conditions remain adequate for purchases. Others suggest spending relies on credit rather than income, creating unsustainable patterns. Strong employment for those currently working provides income supporting expenditures even as anxiety about future prospects grows.
Holiday shopping season approaches with retailers closely watching sentiment trends. Many consumers plan to scale back discretionary and semi-discretionary purchases according to separate research. Early shopping with stronger focus on essentials could reduce traditional holiday spending peaks. Practical gifting may replace extravagant purchases as households prioritize budgets.
McKinsey research found U.S. consumer optimism steadily declining since November 2024. Net sentiment, the gap between optimism and pessimism, fell 35% below its November peak. Caution and uncertainty permeate attitudes. Mixed feelings about economic prospects highlight how pressures impact confidence.
Policy Implications and Data Gaps
The confidence decline occurs as the federal government shutdown creates data blackouts for official economic statistics. The Bureau of Labor Statistics will not release September employment reports during the closure. Policymakers and market participants rely increasingly on private surveys and alternative indicators.
Markets widely expect Federal Reserve rate cuts totaling half a percentage point by year-end, with reductions at October and December meetings. Weak confidence data supports accommodative policy arguments. However, persistent inflation complicates the picture. The Fed balances growth support against price stability mandates.
Consumer attitudes will help determine fourth-quarter economic performance. Holiday spending season represents crucial period for retailers and service providers. Strong consumer spending could sustain growth despite sentiment weakness. Alternatively, if confidence deterioration translates to reduced expenditures, economic slowdown risks increase.
Whether September marks temporary weakness or signals sustained deterioration remains unclear. Labor market developments, inflation trajectories, and policy responses will shape confidence patterns through year-end and into 2026. Consumers currently face competing pressures from persistent price increases and weakening job market confidence, creating uncertainty about economic prospects.