Declining Consumer Confidence in Boston Economy

Boston, September 24, 2025

News Summary

Consumer confidence in Boston is on the decline, with lower and middle-income Americans expressing significant concerns about inflation and job prospects. Despite an economy that remains the largest globally, a recent survey shows the consumer confidence index at historic lows. The Greater Boston area is facing unique inflation challenges, including rising housing and food costs, as new housing units are urgently needed to stabilize the market. Policymakers must navigate these economic pressures to support the community’s needs effectively.

Boston

Consumer confidence in the economy is declining, particularly among lower and middle-income Americans. The consumer confidence index is near historic lows according to a monthly survey conducted by the University of Michigan since the 1950s. Consumers express significant worries about inflation, the job market, and tariffs. Despite consumer anxiety, the US economy remains the largest globally, with solid growth compared to other developed nations.

Key economic indicators and near-term outlook

The economy grew by 3.3% in the three-month period ending June 30, following a contraction of -0.5% in the first three months of the year. A Federal Reserve Bank survey forecasts 1.3% growth for the current three-month period and 1.7% annual growth for 2025, below the 2.5% average growth over the past decade. The year-over-year national inflation rate as of August is at 2.9%, above the Federal Reserve’s target of 2% or less.

Regional and sector pressures

The Greater Boston area has an annual inflation rate of 3.2%, exceeding the national average, with categories such as housing (4.8%), apparel (4.2%), and food (3.3%) experiencing high inflation. Transportation costs are stable, with used motor vehicle prices increasing by 3.9%. Gas prices have fallen nearly 10% compared to the previous year.

Massachusetts requires 222,000 new housing units over the next decade to meet demand and stabilize costs. Food prices at home in Boston increased slightly by 0.5% in July; however, meals at restaurants have risen nearly 7%.

Credit, mortgages and energy costs

Average credit card interest rates exceed 20%, nearing all-time highs, impacted by the Federal Reserve’s rate cut. The average rate for a 30-year fixed-rate mortgage is about 6.2%, down from over 7% in January. Future mortgage rates are not tied directly to Fed rates but are influenced by Treasury yields.

National Grid’s electricity rates increased 5.4% as of August 1, while Eversource’s rates rose 4.8%. Upcoming home heating gas rates for November may see a 13% increase proposed by Eversource for some customers.

Labor market and consumer behavior

Massachusetts unemployment stood at 4.8% in July, compared to a national average of 4.3%. Consumer spending, a major economic driver, has remained strong, but new job creation has noticeably slowed. These mixed signals—resilient spending alongside slowing hiring—help explain persistent consumer unease despite overall economic size and recent growth.

International context

European consumers are feeling gloomy, with 54% pessimistic about their own economy, as revealed in recent surveys by BCG. Many European consumers are prioritizing value over luxury, with significant cuts in discretionary spending categories. Households in Europe have notably increased spending on essentials while drastically reducing discretionary expenditure on items like apparel and snacks. Sustainability is increasingly important for European consumers, yet only 17% are willing to pay a premium for sustainable products. Shopping behaviors in Europe reflect a strong preference for brick-and-mortar stores, with 72% of consumers valuing physical shopping experiences.

What this means for residents and policymakers

Household budgets in the Greater Boston area and across Massachusetts face pressure from higher housing, utility, and food costs even as some costs such as gasoline ease. Local housing shortages, measured by the need for 222,000 new housing units over the next decade in Massachusetts, underline how supply constraints can keep living costs elevated. Interest rate movements, Treasury yields, and regional utility adjustments will continue to shape borrowing and household energy bills in the months ahead.

Context and next steps

Analysts note the combination of near-term economic growth, a still-elevated national inflation rate of 2.9% as of August, and localized inflation pressures in Greater Boston creates a complex picture for consumers and policymakers. Monitoring upcoming data on jobs, inflation, housing starts, and utility rate decisions will be crucial for assessing whether consumer confidence stabilizes or continues to decline.

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At-a-glance data table

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Additional Resources

• Boston Globe: Starting Point – Economy & High Prices
• Wikipedia: Consumer Confidence
• BCG: Europeans Brace for More Uncertainty
• Google Search: Inflation Economy
• Boston Herald: August Consumer Confidence Dips
• Encyclopedia Britannica: Economics
• CBS News: National Chains Going Out of Business Due to Interest Rates
• Google News: Consumer Confidence August

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