Consumer Sentiment Craters to Second-Lowest on Record
Consumer Sentiment Craters to Second-Lowest on Record
The News
American consumers are the gloomiest they have been in almost the entire history of the survey, because they expect prices to keep climbing.
The University of Michigan's consumer sentiment index fell to 47.8 in its preliminary September reading released Friday, down 7.5% from August and 13.2% below a year ago, CNBC reported. It is the second-lowest reading on record for data going back to 1952, behind only May of this year.
Year-ahead inflation expectations jumped to 4.6% from 4.0% in August, the highest since June.
The Numbers
The headline index slid from 51.7 in August to 47.8, against expectations of 51.0, ZeroHedge reported. The current conditions gauge eased to 50.9 from 51.9 — down 1.9% — while the expectations index plunged to 45.8 from 51.5, an 11.1% drop that leaves it just off record lows.
Survey director Joanne Hsu said sentiment is now 16% below February, before the start of the Iran conflict, and 13% lower than a year ago. Long-run inflation expectations ticked up to 3.4% after three straight months at 3.3%.
Timeline
Sentiment sits well above current levels just before the Iran conflict begins; year-ahead inflation expectations are 3.4%, according to Hsu.
Sentiment hits its all-time low as rising prices jolt the outlook, CNBC reported.
The headline index reads 51.7 and year-ahead inflation expectations sit at 4.0%. Bureau of Labor Statistics data later show gasoline prices rose 3.9% during the month and fuel oil 10.1%.
The New York Federal Reserve's Survey of Consumer Expectations shows 32.6% of respondents expect their finances to get worse over the next year, up from 30.3% the month before.
The BLS reports consumer prices rose 0.4% in August and 3.4% over the year, with core inflation up 0.3% and 2.4% annually. Hours earlier, Michigan's preliminary September sentiment reading lands at 47.8.
Reactions
"Year-ahead expectations for both personal finances and business conditions plunged," Hsu said. "With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come."
Hsu also said views of Washington's handling of the economy deteriorated: "Opinions of the government's economic policy worsened about 10% this month and remain substantially below February 2026, just prior to the Iran conflict." She added: "Notably, even Republicans, who generally supported economic policy under the current administration, have exhibited a marked decline in favorability."
By Hsu's account, "Democrats and Republicans alike posted sizable declines, while independents were little changed from August."
The left-leaning outlet AlterNet framed the slide in political terms, reporting that Republicans are fuming as consumer sentiment sets a fresh low and that the sharp drop among Republican respondents is bad news for President Donald Trump with the midterms approaching.
ZeroHedge noted the survey's internal oddity: year-ahead inflation expectations jumped the most since May 2026 even though Democrats' expectations fell and those of Republicans and independents were unchanged.
What's Next
The Federal Reserve announces its policy decision next week, and the August inflation report was the last major data point it will see beforehand.
Traders moved hard toward a rate hike after the CPI release. CNBC reported the odds of a hike rose past 85% on Friday; IBTimes, citing CME Group's FedWatch tool, put them at 91.6%, up from 72.4% on Thursday.
Consumers appear to expect the same. For the first time since 2023, a majority — 62% — expect interest rates to rise in the year ahead, up from 49% in August and 23% a year ago, ZeroHedge reported.
More
Pump prices are doing much of the damage. BLS data show gasoline rose 3.9% in August and was up 27.4% from a year earlier, while fuel oil soared 10.1% on the month and 52% over the year, CNBC reported.
The job market is not the driver this time. Labor market expectations were little changed, nominal income expectations held steady, and the share of consumers who expect unemployment to rise over the next year was 61%, up from 57% in August but down from 65% a year ago, ZeroHedge reported.
Households also say they are already behind: 38.6% told the New York Fed their financial situation is worse than a year ago, up from 37.6% in July, according to IBTimes.
Poll
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