US Consumer Sentiment Slumps to 47.8 as Inflation Expectations Climb

The University of Michigan’s preliminary September survey found consumer sentiment fell to 47.8, down from 51.7 in August and 13.2 percent below its year-earlier level¹. The reading missed expectations by a wide margin: economists polled by Reuters had forecast 51.0². In index terms the decline was 7.5% on the month, the lowest level since May³.

That places the figure near the bottom of the survey’s history. The 47.8 reading is described as the second-lowest on record⁴, a level reached while the country absorbs higher energy costs and while the broader economy is being described as facing mounting headwinds⁵.

The survey’s own explanation points at prices. “Consumer sentiment eroded more than expected in September, with rising gasoline prices and renewed talk of tariffs taking a particular toll”⁵. Inflation expectations moved with it: the one-year measure rose to 4.6 percent from 4 percent^6,7.

Why it matters to investors

Sentiment and expectations are moving in opposite directions, which is the uncomfortable combination. Households are more pessimistic about conditions^1,4 while simultaneously expecting faster price increases over the year ahead^6,7.

That complicates the monetary policy choice. Sticky inflation has pushed the odds of a Federal Reserve rate hike to 85%², so on current pricing the central bank would be tightening into a consumer who is already reporting near-record pessimism about conditions. The usual argument for looking through a weak sentiment print is that expectations remain anchored; on this reading they moved the wrong way at the same time^6,7.

The drivers named are both policy-adjacent. Gasoline prices and renewed tariff talk are the two forces the survey identifies⁵, which ties the household mood to the energy market and the trade agenda rather than to the labour market.

What to watch

First, the final September reading against the preliminary 47.8, since the gap between the two will show whether the drop reflected a transient shock or a settled deterioration^1,2.

Second, the inflation expectations series. The move to 4.6 percent from 4 percent on the one-year horizon is the number policymakers watch most closely for evidence that expectations are becoming unanchored^6,7.

Third, whether petrol prices ease. The survey attributes the erosion directly to fuel costs and tariff talk, so relief on either would be the most likely route back up^4,5.