Consumer sentiment falls to four-month low on inflation, unemployment worries
American consumers are growing more pessimistic about the economy amid concerns about higher prices and a softening job market.
The University of Michigan’s Consumer Sentiment Index fell 5.3% to 55.1 in September, down from 58.2 in August and below last September's 70.3. The index is down 21.6% from a year ago.
The expectations index fell 7.5% to 51.7 in September, down from 55.9 in August. It is down 30.6% year over year. The index for current economic conditions fell 2.1% to 60.9, and is down 5.3% from a year ago.
September's decline was seen across a broad swath of the population, groups by age, income and education, noted economist Joanne Hsu, director of Michigan's Survey of Consumers. One key exception was seen among consumers with larger stock holdings where sentiment held firm from last month.
Overall, consumers report that the trajectories of labor markets and business conditions have both softened. They also expressed a weakening outlook for their personal finances as well.
"Weakening consumer views of labor markets are not necessarily a problem for consumer spending if they do not expect to be personally affected," Hsu said. "But in fact, responses to multiple survey questions all show that the financial outlook for consumers has deteriorated as well. These trends suggest that, for many consumers, robust spending will be difficult to maintain going forward."
Inflation
Current views of personal finances edged down this month and have fallen about 13% since the beginning of the year. Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading since November 2024, Hsu said.
In addition, many consumers expect inflation to continue picking up in the year ahead, a sign that they do not believe that price pressures will be abating anytime soon.
Tariffs/Labor
Tariffs remain a key issue for consumers. About 60% of consumers provided unprompted comments about tariffs, compared with 65% in May 2025 and 28% in January 2025.
Consumers increasingly believe that labor market conditions will weaken. About 65% expect unemployment to rise in the year ahead, up from 57% in July 2025 and 35% a year ago.
Consumers expect to be personally affected by these anticipated trends as the expected probability of personal job loss grew sharply this year and ticked up in September to its highest reading since March 2025. This suggests that consumers are indeed concerned that they may be personally affected by any negative developments in labor markets, according to Hsu.
Nearly 70% of consumers expect inflation to exceed any income gains in the year ahead, up from less than 60% in September 2024. Taken together, confidence in incomes has ebbed, reducing a key factor that supported robust spending in 2022 even amid unfavorable levels of consumer sentiment.
