WASHINGTON -- U.S. consumer confidence posted the biggest drop since the start of the year as Americans' expectations for the economy and the job market deteriorated, posing a risk to the household spending that is underpinning growth.
The Conference Board, a business research group, said Tuesday that its consumer confidence index fell to 125.1 in September from a revised August reading of 134.2. Consumers' assessments of both current economic conditions and expectations for the next six months slipped.
The trade war with China and a global slowdown have contributed to uncertainties that are clouding the outlook for the U.S. economy, now in its 11th year of expansion. Last week, the Federal Reserve cut its benchmark rate by a quarter-point for the second time this year, citing trade conflicts and weaker business investments as key reasons.
The overall measure of confidence remains elevated and within the range of the past year, suggesting consumers will continue to support the record-long U.S. expansion, though spending may moderate.
On Wall Street, the decline in confidence contributed to a pullback in stock gains. The stock market had opened with a burst of confidence over the forthcoming latest round of trade negotiations between President Donald Trump's administration and China. But the consumer-confidence report highlighted a nagging uneasiness among households.
Consumer spending, which accounts for about 70% of U.S. economic activity, has so far shielded the economy from some of the adverse effects of tariff and trade tensions. The latest government estimate of U.S. growth said the economy advanced at a moderate 2% annual pace in the April-June quarter. But this month's pullback in confidence reflected a broader pattern of volatility and uncertainty that has affected the economy.
Though a healthy job market and low unemployment had helped sustain consumer optimism in previous months, the survey reported that respondents have grown more pessimistic about both business and job market conditions.
The share of respondents who say jobs are currently plentiful dropped to a three-month low, though the share saying jobs are hard to get cooled.
Michael Pearce, a senior economist at Capital Economics, suggested in a research note that the confidence decline was, "a worrying early sign that consumer spending, the key bastion of strength for the U.S. economy in recent months, may not be immune to the trade war."
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the Trump administration's most recently imposed higher tariffs on Chinese consumer goods likely contributed to the drop in consumer expectations of the direction of the economy in the coming months.
"This time around, the tariffs on consumer goods likely are the culprit," Shepherdson said.
Before the latest number, the Conference Board's measure had been at odds with the University of Michigan's index of sentiment, which has deteriorated since July. Economists at Deutsche Bank Securities suggest that the gap widens ahead of recessions because the former is more backward-looking with its focus on employment, while the Michigan gauge is slightly more forward-looking because of its emphasis on personal finances.
"The escalation in trade and tariff tensions in late August appears to have rattled consumers," Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement. "However, this pattern of uncertainty and volatility has persisted for much of the year, and it appears confidence is plateauing. While confidence could continue hovering around current levels for months to come, at some point this continued uncertainty will begin to diminish consumers' confidence in the expansion."
Some economists said that while consumer confidence has become more volatile, with uncertainties likely holding back many businesses and households, the U.S. economy appears resilient for now.
"These signals are still a 'flashing yellow light' on the dashboard of U.S. growth, not yet a 'red light,' a note from Contingent Macro Research said.
Information for this article was contributed by Bani Sapra of The Associated Press and by William Edwards of Bloomberg News.
Business on 09/25/2019