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U.S. consumer confidence saw a significant decline in September, marking the largest drop in three years. The decrease came amidst growing concerns about the labor market, although there was an increase in the number of households planning to purchase a home in the next six months.

The latest survey from the Conference Board also revealed that consumers anticipate a rise in Inflation over the next year, casting a shadow on their outlook for the economy leading up to the upcoming presidential election on Nov. 5.

Despite the decline in confidence, consumers showed continued interest in activities such as traveling, dining out, and going to the movies. This could help support consumer spending and the overall economic expansion.

Following the recent interest rate cut by the Federal Reserve, which was the first since 2020, there is hope that further easing measures could help bolster consumer optimism and prevent a sharp economic downturn.

The consumer confidence index dropped to 98.7 in September, down from an upwardly revised 105.6 in August. This was the largest decline since August 2021. The survey indicated a decrease in confidence across various income groups, with concerns primarily centered around the labor market.

Consumers’ plans to make big-ticket purchases were mixed, with some intending to buy items like motor vehicles, refrigerators, and clothes dryers, while the intention to buy television sets and washing machines declined. Additionally, there was a strong interest in spending on healthcare and utilities in the coming months.

Meanwhile, the share of consumers planning to purchase a home in the next six months rose to the highest level since August 2023, coinciding with a decline in mortgage rates and a moderation in house price Inflation. Home price appreciation has slowed down as an increase in mortgage rates earlier this year led to a rise in housing supply.

In another report, single-family house prices showed a slight increase on a month-on-month basis, indicating a 4.5% rise in the 12 months through July, marking the smallest increase since June 2023. Lower mortgage rates are expected to boost demand for housing, potentially preventing a significant softening in prices.

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