Consumer prices rose 3.4% in the year through July, well under what households now anticipate. September's confidence reading also missed forecasts by seven points, and a question on personal finances turned negative for the first time.
Americans now expect prices to rise almost twice as fast over the next year as they did over the last one.
Respondents to the Conference Board's September survey put average inflation for the coming 12 months at 6.1%, up 0.3 percentage point from August, with a median of 5.1%. Consumer prices rose 3.4% in the 12 months through July. The average expectation is about 2.7 percentage points above that pace, or roughly 1.8 times it, and about three times the Federal Reserve's 2% target.
The same survey pulled the group's Consumer Confidence Index down 6.7 points to 81.9, from a downwardly revised 88.6 in August. Economists had expected 89.
The components
The decline ran through both halves of the index. The Present Situation Index, covering how consumers see business and job conditions now, lost 7.9 points to 109.3. The Expectations Index, which looks six months ahead, lost 5.9 points to 63.6, a third monthly drop.
Two readings turned negative for the first time. More consumers called their personal finances bad than good, a first in the four years the Conference Board has asked. Their view of current business conditions dipped below zero for the first time since September 2024.
Prices and fuel
Write-in answers centered on costs. "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," said Dana Peterson, the Conference Board's chief economist. Retail diesel set a record of $6.52 a gallon on Sept. 23, the survey's final day. The Sept. 1 to Sept. 23 window also spanned the Fed's quarter-point rate increase.
The jobs gauge
The labor readings pointed the same way. The gap between consumers who say jobs are "plentiful" and those who say they are "hard to get" narrowed by 2.5 points to 1.7%, leaving it barely positive. "Over the next six months, consumers expected both business conditions and the labor market to weaken," Peterson said. Consumers still expect their incomes to rise, though by less than in recent months.
The Labor Department's report on job openings, released at the same hour, showed openings falling to a five-month low of 7.08 million in August.
The market's reaction
Shorter-dated Treasury yields dipped in the minutes after the release, and a consumer discretionary stock fund turned slightly higher after trading lower just before the data. The move did not last into the long end of the bond market. The 30-year Treasury yield later reached 5.613%, its highest level since June 2002.
Two readings
One reading is that the survey is capturing the weight of headlines that all landed inside its window: a rate increase, a seven-month war with Iran and record diesel prices. On that view, spending may hold up better than sentiment, as consumers still expect higher incomes.
The other reading is that a third straight drop in expectations, a jobs gauge near zero and more households calling their finances bad than good point to slower consumption ahead, and that the bond market has not yet priced it.
The data this week will begin to separate the two. The August personal income and spending report, including the Fed's preferred inflation gauge, is due Wednesday. The September jobs report follows on Friday. Spending that holds up alongside falling confidence would support the first reading. A soft payroll number would support the second.