Consumer Confidence Plunges as Inflation Fears Mount Ahead of Fed Meeting

US consumers are growing increasingly pessimistic about their personal finances and job security ahead of the Federal Reserve's September policy meeting. According to the New York Fed's Survey of Consumer Expectations, households expect inflation to remain at 3.6% a year from now and 3% over the next five years.

The survey also found that consumers are becoming more fragile in their view of the labor market. They raised their expectations for the unemployment rate one year from now to the highest level since April 2020, when the US economy was severely impacted by the COVID-19 pandemic.

While consumers are not necessarily worried about losing their jobs, they have become less confident about finding new employment if they were to lose their jobs involuntarily. This combination points to a more fragile view of the labor market, with households appearing less confident about their ability to recover from a job loss even as immediate fears of unemployment eased.

Households also became more pessimistic about their current and future financial situations, weakening their assessment of access to credit both now and a year from now. Inflation expectations offer little relief, with consumers continuing to see inflation running well above the Federal Reserve's 2% target and expecting gasoline prices to be higher a year from now.