American consumer confidence has dropped to a three-year low in September, despite a historic interest rate cut and a decline in inflation rates.
The long-term consumer confidence levels are nearing those witnessed during the 2008 financial crisis and a significant economic recession.
The Consumer Confidence Index has decreased by 6.9 points to 98.7, marking the largest decline since August 2021, amid the COVID-19 pandemic.
The New York-based Conference Board, which tracks consumer sentiments, noted that the most substantial drop occurred among individuals aged 35 to 54 and those earning less than $50,000 annually.
Consumers are increasingly worried about rising prices and potential job losses, as highlighted by the Conference Board.
Even though inflation is steadily declining, overall prices are still over 20% higher than before the pandemic.
As of August, inflation increased by 2.5% year-over-year, slightly below the anticipated 2.6%.
At its peak in June 2022, U.S.
inflation reached 9.2%.
In response, the Federal Reserve recently cut interest rates by a historic 50 basis points.
However, experts suggest it will take several months before these cuts affect credit card and mortgage rates, as the pressures from high rates linger on.
“Prices, especially at grocery stores and for gasoline, continue to rise, and interest rate cuts will take time to trickle down to credit card and mortgage rates,” commented Kenin Spivak, CEO of SMI Group, to the New York Post.
Consumer expectations for the next six months have significantly dropped to 81.7.
Typically, during a recession, this metric hovers just above 80.
While consumer expectations are not definitive indicators of a recession—formally defined by the U.S.
Federal Reserve as two consecutive quarters of declining GDP—they do reflect consumers’ sentiments about the near future.
With the U.S.
general elections set for November 5, the economy remains the primary concern for voters.
The current Democratic administration has been attempting to improve its record on inflation and high interest rates by showcasing other economic achievements.
During President Biden’s tenure, unemployment fell to a historic low of 3.4%, while GDP growth has outpaced that of any other developed economy globally.
Nevertheless, unemployment is slowly on the rise, reaching 4.3% in the summer, partly due to the rising interest rates.
The economy may appear strong on paper, but American consumers do not seem to feel its positive impacts, which could hold significant implications in an election year.
For more insights, visit Money.it.
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