Consumer sentiment measures how confident people feel about their personal financial situation and the broader economy.
Why It Matters
U.S. consumer sentiment is sinking to a four-month low as inflation fears deepen
Year-ahead inflation expectations jumped to 4.6% in September, the highest reading since June and up from 3.4% before the Iran conflict began
The University of Michigan's Index of Consumer Sentiment fell to 48.1 in September, its lowest reading in four months and down 15% from January 2026, as rising inflation fears and a deteriorating outlook for business conditions weighed on households.
August's reading of 51.7 represented a 7% month-over-month gain that September erased; the index also trailed the year-ago September 2025 figure of 55.1 by 12.7%. The final September number edged above the preliminary estimate of 47.8 and topped the 47.6 consensus forecast compiled by Reuters.
Joanne Hsu, director of the university's Surveys of Consumers, said that across both current and year-ahead personal finance measures, consumers reported roughly 10% deterioration, as anxiety about elevated prices kept intensifying. The short-run outlook for business conditions dropped amid renewed worries that elevated fuel prices and re-escalating trade disputes could weigh on the broader economy. "Overall, interviews reveal broad agreement across the political spectrum that the outlook for the economy has weakened since the beginning of the year," Hsu said in a statement. "After particularly large declines in sentiment this month, Republican sentiment is now 20% lower than January 2026; Democrats are down 13% over the same period."
The twelve-month inflation outlook climbed to 4.6% from August's 4.0%, its steepest mark since June and a sharp departure from the 3.4% level that prevailed in February, before hostilities with Iran erupted — a level that also topped every 2024 reading. Five-year inflation expectations ticked up to 3.4%, snapping a three-month run at 3.3% and remaining well outside the 2.8%-to-3.2% band that prevailed throughout 2024.
The Index of Consumer Expectations dropped to 46.3 from 51.5 in August, a 10.1% slide, while the Current Economic Conditions index edged down to 50.9 from 51.9, off 1.9%. One relative bright spot was durable-goods buying conditions, which improved as some households said they wanted to lock in purchases ahead of anticipated price increases, the university noted.
September's reading extends a difficult stretch for consumer confidence that began when conflict in the Middle East disrupted oil markets. Sentiment hit an all-time low of 44.8 in May, undercutting every prior result in a data series that stretches back to 1952 and encompasses downturns, wars, the stagflation of the 1970s, the Great Recession, and the Covid-19 pandemic. Sentiment recovered partially in June and July before declining about 8% in August as inflation worries linked to the Middle East conflict reasserted themselves. Every one of the index's four worst results on record has been posted in the last six months, according to CNN.
The Federal Reserve, which earlier this month lifted borrowing costs for the first time in three years, watches inflation expectations carefully, according to CNN. When consumers become convinced that prices will keep climbing, they tend to accelerate purchases and push for wage increases — behaviors that can feed the inflationary pressures they fear.
The university's next data release, covering preliminary October figures, is scheduled for Friday, October 9.
- Drives Spending: High confidence makes people spend and shop more, which helps the economy grow.
- Signals Slowdowns: Low confidence makes people save money and buy fewer things, which can slow down economic activity.
- Risks Inflation: Too much optimism can cause high spending, leading to rising prices and inflation.
Year-ahead inflation expectations jumped to 4.6% in September, the highest reading since June and up from 3.4% before the Iran conflict began
The University of Michigan's Index of Consumer Sentiment fell to 48.1 in September, its lowest reading in four months and down 15% from January 2026, as rising inflation fears and a deteriorating outlook for business conditions weighed on households.
August's reading of 51.7 represented a 7% month-over-month gain that September erased; the index also trailed the year-ago September 2025 figure of 55.1 by 12.7%. The final September number edged above the preliminary estimate of 47.8 and topped the 47.6 consensus forecast compiled by Reuters.
Joanne Hsu, director of the university's Surveys of Consumers, said that across both current and year-ahead personal finance measures, consumers reported roughly 10% deterioration, as anxiety about elevated prices kept intensifying. The short-run outlook for business conditions dropped amid renewed worries that elevated fuel prices and re-escalating trade disputes could weigh on the broader economy. "Overall, interviews reveal broad agreement across the political spectrum that the outlook for the economy has weakened since the beginning of the year," Hsu said in a statement. "After particularly large declines in sentiment this month, Republican sentiment is now 20% lower than January 2026; Democrats are down 13% over the same period."
The twelve-month inflation outlook climbed to 4.6% from August's 4.0%, its steepest mark since June and a sharp departure from the 3.4% level that prevailed in February, before hostilities with Iran erupted — a level that also topped every 2024 reading. Five-year inflation expectations ticked up to 3.4%, snapping a three-month run at 3.3% and remaining well outside the 2.8%-to-3.2% band that prevailed throughout 2024.
The Index of Consumer Expectations dropped to 46.3 from 51.5 in August, a 10.1% slide, while the Current Economic Conditions index edged down to 50.9 from 51.9, off 1.9%. One relative bright spot was durable-goods buying conditions, which improved as some households said they wanted to lock in purchases ahead of anticipated price increases, the university noted.
September's reading extends a difficult stretch for consumer confidence that began when conflict in the Middle East disrupted oil markets. Sentiment hit an all-time low of 44.8 in May, undercutting every prior result in a data series that stretches back to 1952 and encompasses downturns, wars, the stagflation of the 1970s, the Great Recession, and the Covid-19 pandemic. Sentiment recovered partially in June and July before declining about 8% in August as inflation worries linked to the Middle East conflict reasserted themselves. Every one of the index's four worst results on record has been posted in the last six months, according to CNN.
The Federal Reserve, which earlier this month lifted borrowing costs for the first time in three years, watches inflation expectations carefully, according to CNN. When consumers become convinced that prices will keep climbing, they tend to accelerate purchases and push for wage increases — behaviors that can feed the inflationary pressures they fear.
The university's next data release, covering preliminary October figures, is scheduled for Friday, October 9.
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