Wall Street has maintained a sense of optimism about what the near future holds—at least if equity futures are any indication. That sentiment stands in contrast to warnings from major banking executives, including JPMorgan Chase CEO Jamie Dimon, who recently cautioned that the economy is showing signs of weakness.
However, consumers appear far less sanguine. Surveys conducted by The Conference Board and the Federal Reserve Bank of New York have indicated a gloomy outlook, with expectations for inflation, personal household finances and labor market conditions all trending negative. This erosion of sentiment has direct implications for the broader economy. Consumer and business outlooks are both pivotal to inflation projections, according to the Cleveland Federal Reserve. These expectations shape short-term planning for households and companies alike.
When people anticipate rising prices, their behavior shifts; households begin negotiating for higher wages in advance and cut back on spending, while companies respond by raising prices to offset wage pressures and protect margins, even at the risk of reduced sales. Since consumer spending typically represents about 69% of total U.S. GDP, its fluctuations have a pronounced effect on economic activity.
The most recent data from The Conference Board showed a decline in sentiment in September, with the Consumer Confidence Index dropping from 97.8 in August to 94.2—the lowest reading since April. The Present Situation Index, which reflects consumers' views of current business and labor market conditions, fell seven points to 125.4, marking the largest monthly drop in a year. Stephanie Guichard, senior economist for global indicators at The Conference Board, noted in prepared statements that assessments of business conditions have become considerably less positive, while evaluations of job availability have declined for the ninth consecutive month, hitting a multi-year low.
Meanwhile, the Expectations Index, which tracks short-term views on income, business conditions and the labor market, edged down by 1.3 points to 73.4 and has remained below 80 since February 2025—a threshold historically seen as a warning of a looming recession.
Tracking similar trends, the Federal Reserve Bank of New York’s August survey found median inflation expectations rose slightly to 3.2% at the one-year mark and 3% at the three-year mark. Notably, the mean perceived probability of replacing a lost job plunged to 44.9%, the lowest reading since the survey began in 2013. Median expected household income growth remained firm at 2.9%. Still, the median projection for household spending growth rose to 5%, suggesting that, on average, consumers expect their spending will outpace income—further reinforcing concerns about household finances.
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