The US Conference Board released a report on Tuesday revealing an unexpected sharp decline of 6.9 points to 98.7 in US consumer confidence for September, marking the largest drop since August 2021. This was attributed to concerns about the labor market and overall economic outlook.

Among them, the future expectations index dropped to 81.7 in September, while the current situation index fell to 124.3. Analysts believe that recent slowdown in the labor market and continued high living costs are putting pressure on consumer confidence, leading this index to be significantly below pre-pandemic levels.

The job market remains a major concern.

Additionally, details of the report reflect concerns about the job market, which was one of the reasons behind the Federal Reserve's decision last week to cut interest rates by 50 basis points.

Chief Economist of the Conference Board, Dana Peterson, stated in a release:

"Consumers' assessment of the current business conditions has turned negative, and their views on the current labor market conditions have further deteriorated. Consumers are more pessimistic about the future labor market conditions and have more negative expectations for future business conditions and income."

"Despite the labor market remaining fairly healthy with low unemployment, few layoffs, and relatively high wage levels, the deterioration of key components of the index may reflect consumer concerns about the labor market, as well as reactions to reduced working hours, slowing wage growth, and fewer job opportunities. All five components of the index worsened."

Specifically, the proportion of consumers indicating ample job opportunities has been declining for the seventh consecutive month, reaching 30.9%, still the lowest percentage since March 2021, and this continuous downward trend is the longest since 2008. Meanwhile, the proportion of consumers indicating difficulty in finding work has risen to 18.3%, also the highest level since early 2021.

The difference between these two proportions is an important indicator that economists use to measure the labor market, and this indicator has been shrinking for the eighth consecutive month, also the longest duration since the 2008 financial crisis.

While consumers still believe that the possibility of an economic recession next year is low, Peterson stated that the proportion of consumers who believe the economy has already entered a recessionary period has seen a 'slight increase.'

Federal Reserve Chairman Powell stated last week that although the labor market is slowing down, it is still in a 'healthy state,' and the overall economy is 'fundamentally sound.' Forecasts released alongside interest rate decisions show that the unemployment rate is expected to rise from the current 4.2% to 4.4% in the fourth quarter and remain at that level in 2025, with most officials believing there is upside risk to their forecasts.

Data from the Conference Board shows that about one-third of consumers expect interest rates to fall next year, the highest proportion since April 2020. Written responses from September mentioned an increasing impact of interest rates on consumer economic perceptions.

Furthermore, although consumers' assessments of their household financial conditions in September remain relatively positive, both current and future expectations for the next six months have weakened compared to August. These indicators are not included in the calculation of the Consumer Confidence Index.

In this context, consumers' purchasing plans for major household appliances vary, with a slight decrease in plans to purchase smart phones or laptops/personal computers in the next six months. However, calculated on a six-month moving average, purchasing plans for homes and new cars have slightly improved.

The pace of U.S. home price growth slowed in July.

Due to the still higher mortgage loan interest rates, potential buyers are choosing to wait and see, leading to inventory accumulation, and the growth rate of house prices in the USA slowed down in July.

According to S&P CoreLogic Case-Shiller data, the overall house prices in the USA increased by 5% year-on-year, lower than the 5.5% annual growth rate in June. After seasonal adjustments, house prices in July rose by 0.2% month-on-month, setting a record for the 14th consecutive time.

The index for July tracked a three-month period starting from May, while according to Freddie Mac data, the 30-year mortgage loan rate peaked at 7.22%. Although borrowing costs have since declined, affordability remains an obstacle. Due to many potential homebuyers hesitating, market competition has cooled down.

At the same time, there has been a sharp increase in housing supply in the market. The active listings in July increased by 14% compared to a year ago, and many listings have become outdated. According to Redfin Corp. data, overall sales have been weak due to the worst spring selling season in over a decade.

The Fed cut interest rates for the first time this month and indicated that there would be further cuts in the future, which could put more downward pressure on mortgage costs, thereby helping to revive the housing market.

Editor/Lambor