Consumer sentiment experienced a notable decline in September, surpassing expectations as concerns mount over the ramifications of tariffs imposed during the Trump administration. The University of Michigan’s consumer sentiment survey, released on Friday, indicated that the headline consumer sentiment index dropped to 55.4 for the month. This figure was not only below the anticipated 58 predicted by economists surveyed by Bloomberg but also marked a decrease from the previous month’s reading of 58.2.
Joanne Hsu, the director of the University of Michigan’s consumer surveys, highlighted that approximately 60% of respondents referenced tariffs during their interviews without being prompted, a figure that remained consistent with the responses from the previous month. Hsu remarked that consumers continue to express concerns over various vulnerabilities within the economy, including increased risks to business conditions, labor markets, and inflation levels.
Furthermore, expectations for long-term inflation—spanning the next five to ten years—increased to 3.9% in September. This was above the 3.4% predicted by economists and higher than the 3.5% recorded in August, although it still falls considerably short of the 4.4% level noted in April. Year-ahead inflation expectations, however, stabilized from the previous month, aligning with economists’ forecasts at 4.8%.
This report follows the release of August’s Consumer Price Index (CPI), which indicated a rise in inflation for that month, underscoring the impact of tariffs on consumer prices. Despite this, recent labor market data, which has shown signs of weakness, is anticipated to be a pivotal factor in the Federal Reserve’s upcoming decision regarding interest rate reductions. However, uncertainty persists around the magnitude of the cuts and the potential for further reductions in the future.
