The latest findings from the University of Michigan’s September consumer sentiment survey, released on Friday, indicate a decline in consumer sentiment that has exceeded expectations. The index dropped to 55.1, falling short of the anticipated 55.4 predicted by economists surveyed by Bloomberg, and representing a significant decrease from August’s 58.2 and the previous year’s 70.3.
Preliminary results of the survey, shared earlier this month, had already signaled a deterioration in American consumer confidence during the first half of September, influenced in part by concerns regarding President Trump’s tariffs. Joanne Hsu, the director of the consumer surveys at the University of Michigan, expressed that interview responses revealed widespread worries among consumers about potential inflation and the risk of declining labor markets. “Consumers continue to express frustration over the persistence of high prices,” she noted, highlighting that 44% of respondents mentioned that rising costs were adversely impacting their financial situations, marking the highest level of concern recorded in a year.
Hsu pointed out a few differences within the overall sentiment trends. Notably, consumers with significant stock holdings exhibited stable sentiments, contrasting with those who have smaller or no investments, whose feelings of optimism decreased. Additionally, sentiment varied across political affiliations; it fell by approximately 9% among independents and 4% among Republicans, while sentiment for Democrats showed an increase.
On a more positive note, the survey also examined inflation expectations among Americans. The one-year outlook for inflation eased slightly to 4.7% in September, down from 4.8% in August—an outcome that economists had anticipated would remain steady. Long-term inflation expectations for the next five to ten years, however, rose to 3.7% from 3.5% in the previous month, but this remained below the 3.9% projected by economists.
These recent findings coincide with the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, which indicated a slight easing of “core” inflation in August. This data has contributed to sustaining trader confidence regarding a potential rate cut by the Federal Reserve in its upcoming October meeting.
