WASHINGTON (Reuters) - U.S. consumer confidence ebbed in September as an escalation in trade tensions fanned concerns about business and labor market conditions, a potentially worrying signal for consumer spending, which has been driving the economy.

FILE PHOTO: Workers at the Kraft Heinz booth count money at the shareholder shopping day as part of the Berkshire Hathaway annual meeting weekend in Omaha, Nebraska, May 5, 2017. REUTERS/Rick Wilking/File Photo

The relatively downbeat survey from the Conference Board on Tuesday mirrors other confidence surveys and could renew financial market fears of a recession that had been assuaged somewhat by strong August retail sales, industrial production and housing data.

The Federal Reserve last week cut interest rates for the second time to offset the impact on the economy from the year-long trade war between the United States and China, and slowing global growth. The U.S. central bank lowered rates in July for the first time since 2008.

The longest economic expansion on record, now in its 11th year, is mostly being sustained by consumer spending, via the lowest unemployment rate in nearly 50 years. But there have been fears the U.S.-China trade war, which has weighed on business investment and manufacturing, could slam the brakes on consumer spending.

“We aren’t in a recession yet, but the consumer is plainly worried,” said Chris Rupkey, chief economist at MUFG in New York. “Consumer confidence is fragile and any further escalation of the trade war will probably be all it takes to push them and the economy over the edge.”

The Conference Board said its consumer confidence index dropped to a reading of 125.1 this month from a downwardly revised 134.2 in August. The index was previously reported at 135.1 in August. Economists polled by Reuters had forecast it declining to 133.5 in September.

The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, decreased to 169.0 this month from 176.0 in August. The Conference Board said “the escalation in trade and tariff tensions in late August appears to have rattled consumers,” and that “it appears confidence is plateauing.”

The White House announced a new round of tariffs on Chinese imports last month. Some of the new duties, which include a range of consumer goods, came into effect this month.

A trade deal between the two economic giants appeared elusive on Friday after Chinese officials unexpectedly canceled a visit to farms in Montana and Nebraska. President Donald Trump said on Tuesday he would not “accept a bad deal for the American people.”

The Conference Board survey is now converging with the University of Michigan survey, which showed a sharp drop in consumer sentiment in August. While the University of Michigan’s sentiment index edged up in September, worries about the impact of tariffs on the economy continued to weigh heavily on consumer’s minds.

GROWTH ENGINE

“The trade war is beginning to more meaningfully weigh on confidence,” said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Decreased confidence could weigh on consumer spending, but consumption should remain a key engine of growth in third quarter.”

The dollar was little changed against a basket of currencies, while U.S. Treasury prices rose. Stocks on Wall Street were trading slightly lower.

The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to 33.2 in September from 38.3 in July. That measure closely correlates to the unemployment rate in the Labor Department’s employment report.

The share of consumers expecting more jobs in the months ahead decreased to 17.5% this month from 19.9% in August, while those anticipating fewer jobs increased to 15.7% from 13.7%.

These findings are in line with a slowdown in job growth. Employers added 130,000 jobs to their payrolls in August. Job gains have averaged 158,000 per month this year, above the roughly 100,000 per month needed to keep up with growth in the working age population. The unemployment rate is at 3.7%.

Other data on Tuesday showed mixed readings on house price inflation in July. The Federal Housing Finance Agency (FHFA) said house prices accelerated in July amid gains across the key regions, a trend that could offset some of the boost to the housing market from declining mortgage rates.

The FHFA said its house price index increased a seasonally adjusted 5.0% in July from a year ago. That followed a 4.8% rise in June. Prices rose 0.4% on a monthly basis after advancing 0.2% in June. The FHFA’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

Separately, the S&P CoreLogic Case-Shiller house price index for 20 metro areas increased 2.0% from a year ago in July, the smallest gain since August 2012, after rising 2.2% in June.

“Lower mortgage interest rates and tight inventory levels are supporting home values, and we expect annual growth to stay close to 3% over the remainder of the year,” said Matthew Pointon, property economist at Capital Economics in New York.