This week brought two readings on the American consumer, a day apart. The first says the consumer is in the worst mood in 12 years. The second says the consumer spent more in August than in any month since March 2025.
Both are true, and the gap between them is the story.
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What the consumer says
On Tuesday, September 29, the Conference Board published its consumer confidence index for September. The index fell 6.7 points to 81.9, the lowest level since 2014. The survey ran from September 1 to 23 - a window that included the Fed's rate hike.
| Consumer confidence | August | September |
|---|---|---|
| Headline index | 88.6 | 81.9 |
| Present situation | 117.2 | 109.3 |
| Expectations, next six months | 69.5 | 63.6 |
| Average 12-month inflation expectations | 5.8% | 6.1% |
| Expect higher interest rates in the next year | 63.2% | 68.4% |
Source: The Conference Board, September 29, 2026. August values derived from the published changes.
Three details stand out. The share of consumers describing their finances as bad overtook those describing them as good - only the second time since the question was added to the survey four years ago. The expectations index fell for a third straight month. And in the write-in answers, mentions of prices, and of fuel prices in particular, hit a record.
And what the consumer does
That same day Carnival, one of the largest cruise companies, reported its third quarter. Record revenue, record net yields and record net income of $1.9 billion. Customer deposits - money paid in advance for future sailings - reached a third-quarter record of $7.6 billion, and bookings for 2027 are at record occupancy and pricing. The stock rose 13.4% that day.
The next day, September 30, the official data arrived. Real spending rose 0.6% in August, the largest gain since March 2025. Real disposable income did not change at all.
| August 2026 | Monthly change |
|---|---|
| Disposable income, nominal | 0.3% |
| Disposable income, real | 0.0% |
| Spending, nominal | 0.9% |
| Spending, real | 0.6% |
| Saving rate | 4.1% (July: 4.6%) |
Source: US Bureau of Economic Analysis, September 30, 2026.
In other words, consumers spent more without earning more, and the gap was funded from savings: the saving rate fell from 4.6% to 4.1%, the lowest since November 2022.
The cushion discovered this week
Here comes the detail that complicates the picture. Wednesday's data included the annual revision of the national accounts - a correction of past data, back to 2021.
Before the revision, July's saving rate stood at 3.0%. After it - 4.6%. So American consumers had a bigger cushion than was thought, which explains part of their ability to keep spending while they complain.
The same revision also changed inflation:
| PCE price index, annual change | July, as published in August | July, after revision | August |
|---|---|---|---|
| Headline | 3.7% | 3.4% | 3.4% |
| Core | 3.3% | 3.0% | 3.0% |
Source: Bureau of Economic Analysis, releases of August 26 and September 30, 2026.
The headline "inflation fell from 3.7% to 3.4%" is technically correct, but misleading. August's annual rate is exactly the same as revised July. The decline is in history, not in prices. And within the month, the headline index rose 0.3% and the core 0.2%.
That same morning, second-quarter growth was revised too: 2.2% at an annual rate, from 1.5% in the previous estimate.
The Fed, and the curve
On Tuesday, a day before the data, New York Fed President John Williams said that after the September hike there is no urgency for the next step. If the economy evolves in line with his forecast, he said, one more hike may be appropriate late this year, to bring inflation back to target sooner.
And the bond market kept climbing through all of it:
| 9/22 | 9/30 | Last time at this level | |
|---|---|---|---|
| 10-year | 4.96% | 5.29% | May 2002 |
| 20-year | 5.33% | 5.68% | June 2002 |
| 30-year | 5.29% | 5.64% | July 2001 |
| 10-year real | 2.63% | 2.93% | November 2008 |
| 30-year real | 3.04% | 3.33% | Record since the series began, 2010 |
US Treasury closing data; comparisons computed from its full archive.
In six trading days the 10-year yield rose 33 basis points, and the real yield 30. Implied inflation expectations - the gap between the two - rose just three basis points, to 2.36%. The market is not pricing more inflation; it is demanding a higher real return. And the spread between the 2-year and the 30-year widened from 58 to 76 basis points.
On October 1 yields eased slightly: the 10-year closed at 5.24% and the 30-year at 5.61%. The same day the ISM manufacturing survey was published, and its prices component rose to 77.9, from 71.1 in August.
What else this week
Today, Friday, at 8:30 a.m. New York time, brings the September jobs report. That is the number that will say whether the income side - jobs and wages - is holding, in other words whether there is something to fund the pace of spending as the cushion shrinks.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What interests me this week is that the American consumer is behaving the opposite of what they say, and both sides are real.
The survey measures sentiment, and the sentiment is clear: fuel prices, rising rates, war. But behavior is set by what is in the account, and the revision found more there than we thought. Carnival is filling ships for next year at record prices on the same day consumers report their deepest gloom since 2014.
That gap cannot last forever, and the question is which side converges to the other. If employment holds, sentiment may improve. If real income keeps standing still, the savings run out and spending will have to fall toward the sentiment. August - real income zero, real spending 0.6% - is exactly the month in which that gap widened.
And on inflation: anyone reading "a drop to 3.4%" as a sign of relief is reading the number wrong. The same 3.4% was there in July too. What changed is the measurement, not the prices.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of any data release or rate decision.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
