Consumer Confidence Slips as Lower-Income Households Feel Strained

Consumer confidence edged down in October as the outlook among Americans grew more cautious heading into the year’s final months. The latest Conference Board Consumer Confidence Index slipped by 1 point to 94.6, from 95.6 in September, marking its lowest level since spring. Beneath the headline number that was reported Tuesday (Oct. 28), a divergence emerged between current and future assessments of economic conditions and between income groups.

The Present Situation Index, which captures consumers’ appraisal of current business and labor conditions, rose 1.8 points to 129.3. The Expectations Index, however, fell 2.9 points to 71.5, staying below the threshold of 80 that typically signals recession concerns for the eighth straight month.

Inflation Expectations Edge Higher

Inflation remains the leading worry for consumers. The Conference Board report showed 12-month inflation expectations rising to 5.9%, up slightly from 5.8% in September, reversing earlier improvements. Consumers also grew more concerned about interest rates, with 52.8% expecting higher borrowing costs and just over a quarter anticipating any decline. The share expecting stock prices to rise — 49.9% — remained unchanged.

That persistence of inflation worries echoes the broader pattern seen in PYMNTS Intelligence’s “Wage to Wallet Index,” done in collaboration with WorkWhile and Ingo Payments, which finds that inflation and income continuity have become defining features of consumer sentiment among the nation’s 60 million Labor Economy workers.

These workers, typically earning $25 an hour or less and under $50,000 annually, represent about one-third of the U.S. workforce and drive roughly 15% of total consumer spending, or about $1.7 trillion annually.

The October confidence reading showed sharper declines in sentiment among households earning below $75,000, even as optimism improved for those earning above $200,000.

That income-based divide parallels findings in the PYMNTS report, which highlights the financial fragility of working households. According to PYMNTS Intelligence, Labor Economy workers hold just $5,737 in liquid savings on average, compared with $9,869 among higher-income consumers. Fewer than 1 in 3 could cover a $2,000 emergency within 30 days.

The result is a feedback loop where financial shocks — from higher prices to missed shifts or delayed pay — quickly translate into reduced consumer spending. This fragility has broad implications for the overall economy. PYMNTS estimates that a 1% wage change in this segment equates to about $17 billion in GDP impact.

When wages rise, spending follows suit; when hours are cut or pay delayed, consumption slows almost immediately. That dynamic helps explain why confidence among lower-income groups deteriorates faster when inflation expectations tick up or wages stagnate.

The Uneven Impact of Economic Pressure

The data also show how economic pressure plays out differently across demographic lines. As reported by The Conference Board on Tuesday, confidence improved among consumers aged 35 to 54 but slipped among those younger than 35 and older than 55.

Concerns about employment prospects and political uncertainty increased, especially amid an ongoing government shutdown that has raised anxieties about fiscal stability and consumer prices.

Softer Holiday Spending Plans

While nearly half of consumers still expect stock prices to rise, spending plans are more restrained, per The Conference Board findings. Plans to buy cars, particularly used vehicles, rose modestly, while home-buying intentions softened but remained in an upward six-month trend. Consumers’ intentions to spend on services such as pet care, streaming and auto maintenance also rebounded.

Yet early holiday indicators point to restraint: shoppers expect to spend 3.9% less on gifts and 12% less on non-gift items, citing promotions and value maximization as top priorities.

October’s data paint a picture of a U.S. consumer who is steady but stretched. Optimism about current job and income conditions has kept overall confidence from sliding sharply, but the persistent weakness in expectations signals uncertainty heading into the holiday season.