Wall Street is largely convinced that the American economy will avoid a recession, with stocks climbing higher week after week thanks to this optimism. Yet consumers on the ground are looking increasingly shaky, pushing confidence barometers into unhealthy territory.\u00a0<\/p>\n
A few times this year recession indicators have flashed a warning. The yield curve inverted and then promptly righted itself. And the White House\u2019s tariff plans led the likes of JPMorgan\u2019s Jamie Dimon<\/a> to warn economic contraction can\u2019t be taken off the table.\u00a0<\/p>\n This week came another warning: The Conference Board\u2019s Expectations Index<\/a>, which analyzes the short-term outlook for income, business, and labor market conditions\u2014decreased by a further 1.3 points to 73.4. The benchmark triggering a recession warning is a reading of 80.<\/p>\n Consumer confidence dropped \u201csharply\u201d in September, the organization wrote. Its Consumer Confidence Index declined to 94.2 in September from 97.8 in August, while the Present Situation Index (based on consumers\u2019 assessments of business and labor market conditions) fell seven points to 125.4. Both indexes are measures against a 100-point benchmark recorded in 1985.\u00a0<\/p>\n If there\u2019s one part of the economy that analysts don\u2019t want to see weakening, it\u2019s consumers. This week regional Fed President Beth Hammack<\/a> highlighted that Wall Street\u2019s expectations of solid business performance were derived from stable consumer spending. Indeed, the likes of Bank of America CEO Brian Moynihan<\/a> have expressed their surprise and optimism given that American consumers have fared so well in the past couple of years, and have continued to drive the economy as a result.\u00a0<\/p>\n If that spending engine stutters it would have significant ramifications for the economy as a whole. Stephanie Guichard, senior economist, global indicators, at the Conference Board, wrote alongside the data release: \u201cThe present situation component registered its largest drop in a year. Consumers\u2019 assessment of business conditions was much less positive than in recent months, while their appraisal of current job availability fell for the ninth straight month to reach a new multiyear low.\u00a0<\/p>\n \u201cConsumers were a bit more pessimistic about future job availability and future business conditions but optimism about future income increased, mitigating the overall decline in the Expectations Index.\u201d<\/p>\n Indeed, September\u2019s deterioration doesn\u2019t signal the first time the indicator has entered recession territory\u2014it\u2019s been there since February 2025\u2014but marks a further step away from a healthy outlook over a prolonged period of time.<\/p>\n When it comes to economic forecasting, often the problem with inflation can come down not only to the actual increases in prices, but also consumers\u2019 expectations of how much they will go up. That\u2019s because expectations could either cause shoppers to change their habits unnecessarily, or begin hunting for higher-paid jobs and inducing a wage-price spiral.\u00a0<\/p>\n On this front the Conference Board found slight improvement, but still cause for some concern. It reported consumers\u2019 average 12-month inflation expectations sat at 5.8% in September from 6.1% in August\u2014well above the reality of a little under 3% noted in the latest Bureau of Labor\u00a0Statistics (BLS) reporting.<\/p>\n \u201cConsumers\u2019\u00a0write-in responses\u00a0showed that references to prices and inflation rose in September, regaining its top position as the main topic influencing consumers\u2019 views of the economy,\u201d added\u00a0Guichard.\u00a0\u00a0<\/p>\n The data question<\/strong><\/p>\n That being said, economists are already warning spectators against relying too heavily on private sector data in a potential void of reporting during the government shutdown.\u00a0<\/p>\n There will be no jobs report on Friday, nor will there be U.S. jobless claims data released during the shutdown. And with the BLS compiling the consumer price index report slated for mid-October, this too could be impacted by the shutdown.<\/p>\n UBS\u2019s chief economist warned clients in a note this morning: \u201cEconomists now lack official economic data from the U.S.; private sector data is a poor substitute. Private data is like viewing the economy through a keyhole\u2014clear, but with a narrow field of vision.<\/p>\n \u201cOfficial data is like opening the door. Private data relies on official data to model the bits of the economy outside its field of vision, and that modeling becomes less accurate in the absence of official data.\u201d\u00a0<\/p>\n