US consumer sentiment slipped to a four-month low in September as worries about rising inflation eroded households' confidence in their purchasing power, the University of Michigan's Surveys of Consumers showed on Friday.The Consumer Sentiment Index fell to a final reading of 48.1 this month, down from 51.7 in August. The final figure was an improvement on a preliminary reading of 47.8, and slightly above the 47.6 forecast by economists polled by Reuters — but it still leaves the index down 15% from January.
Finances under pressure
The survey found that consumers' views of both their current and year-ahead personal finances weakened by about 10%, with concerns over high prices continuing to climb. "Overall, interviews reveal broad agreement across the political spectrum that the outlook for the economy has weakened since the beginning of the year," said Joanne Hsu, the director of the Surveys of Consumers. "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."
Inflation expectations edge higher
Expectations for inflation over the next year increased to 4.6% from 4.0% in August — a sharp jump from 3.4% in February, before the US-Israeli war with Iran began disrupting global energy supplies. Consumers' expectations for inflation over the next five years edged up to 3.4% after holding at 3.3% for three straight months.
Why it matters
Sentiment data feeds directly into the debate over the path of interest rates. With inflation still running well above the Federal Reserve's 2% target and the central bank having raised rates earlier this month, the combination of weakening confidence and climbing inflation expectations keeps policymakers under pressure. Next week's PCE price index report — the Fed's preferred inflation gauge — will be closely watched for signals on whether rate hikes will continue into the final quarter of the year.
Sources:
US consumer sentiment eases to four-month low in September — Reuters