For lower-income consumers, the most vulnerable subset of the paycheck-to-paycheck economy, the outlook is, in a word … gloomy.
As measured in the latest reading by The Conference Board, the consumer confidence index dropped to a reading of 98.7 this month, down from 105.6 last month. The Board noted that this was the largest decline seen since August of 2021. All five of the consumer confidence index components, spanning the outlook for the economy, inflation and concerns about the job market, deteriorated, the Board said in a Tuesday (Sept. 24) press release.
The outlook was particularly dour for consumers ages of 35 to 54 and earning less than $50,000.
Overall, consumers see inflation expectations over the next 12 months at 5.2%. And there’s a mixed outlook on spending plans, as “plans for big-ticket appliances were mixed and plans to buy a smartphone or laptop/PC in the next six months eased. However, on a six-month moving average basis, purchasing plans for homes and new cars improved slightly. When asked about plans to buy more goods or services over the next six months, consumers showed a slightly greater preference for purchasing goods,” per the release. The read across here is that the Fed’s most recent rate cuts may spur at least some near-term consideration of opening the proverbial wallets.
But those expectations may be tempered a bit when surveying the jobs market. As many as 18% of consumers expected their incomes to increase, down from 18.6% in August. And13% expected their incomes to decrease, up from 11.7%. But 18.3% anticipated fewer jobs, up from 17%.
“Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income,” Dana Peterson, chief economist at The Conference Board, said in the release.
The expectations index was 4.6 points lower at 81.7. We’re inching closer to the critical 80 level — because a reading below that level usually correlates to a recession.
The consumer confidence bifurcation among different demographics remains stark, according to the Board: “On a six-month moving average basis, the 35–54 age group has become the least confident while consumers under 35 remain the most confident. Confidence declined in September across most income groups, with consumers earning less than $50K experiencing the largest decrease. On a six-month moving average basis, consumers earning over $100K remained the most confident,” the Tuesday release detailed.
PYMNTS Intelligence data has detailed that in the latest forays into the mindset — and spending habits — of paycheck-to-paycheck consumers, as of last month, 25% of paycheck-to-paycheck consumers struggle to pay their bills, a high not seen since September 2021 — which correlates roughly to the last nadir, as estimated above, for consumer confidence. In fact, the share of consumers who struggle to pay their monthly bills has steadily risen since February 2024.
PYMNTS Intelligence data shows that 43% of consumers changed their financial lifestyle in the last two years. This includes 27% of consumers who reported downward financial mobility. Millennials and consumers annually earning less than $50,000 are the most likely to report downward financial mobility in their financial lifestyle, each at 34% — which underscores the negative sentiment being displayed by this income bracket.
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