Consumer News: Consumer sentiment sinks as Americans grow more worried about prices

Rising fuel costs and inflation concerns are putting additional pressure on household finances

By Mark Huffman of ConsumerAffairs

• The University of Michigans Consumer Sentiment Index fell to 48.1 in September, down 7% from August and 12.7% from a year ago.

• Consumers expectations for the economy deteriorated sharply, with the Expectations Index falling 10.1% in a single month.

• Inflation worries intensified, with consumers expecting prices to rise 4.6% over the next year, up from 4% in August.

American consumers became significantly more pessimistic about the economy in September as higher prices, rising fuel costs and concerns about the future weighed on household finances.

The University of Michigans final September Surveys of Consumers showed its closely watched Index of Consumer Sentiment falling to 48.1, down from 51.7 in August and 55.1 in September 2025. That represents a 7% monthly decline and a 12.7% drop from a year earlier.

The final number was slightly better than the preliminary September reading of 47.8, but it still put consumer confidence at its lowest level in four months. Sentiment has fallen about 15% since January.

The biggest deterioration was in consumers' expectations for the future.

The university's Index of Consumer Expectations fell to 46.3, down from 51.5 in August, a 10.1% monthly decline. The Current Economic Conditions Index slipped more modestly, to 50.9 from 51.9.

Household finances are under pressure

Joanne Hsu, director of the Surveys of Consumers, said consumers' assessments of both their current finances and their expected finances over the coming year weakened by about 10% during September.

High prices remain a major concern.

About 55% of consumers said high prices were hurting their personal finances, compared with 53% in August and 44% a year earlier, according to additional survey findings. Mentions of gasoline prices also increased, with 31% of consumers bringing up fuel costs.

Consumers also appear increasingly concerned that the pressure won't disappear soon.

"Consumers do not believe that relief from high gas prices is on the horizon," Hsu said, adding that respondents generally expect gasoline prices to keep rising in both the short and long term.

Trade concerns also resurfaced. The share of consumers spontaneously mentioning tariffs rose from 24% in July to 35% in September. The survey found that worries about elevated fuel prices and renewed trade disputes contributed to a sharp deterioration in expectations for near-term business conditions.

Inflation expectations jump

One of the more significant findings for consumers and potentially for Federal Reserve policymakers was a sharp increase in expected inflation.

Consumers now expect prices to rise 4.6% over the next 12 months, up from 4% in August and the highest reading since June. That compares with 3.4% in February.

Long-term inflation expectations also edged higher. Consumers expect annual inflation of 3.4% over the longer term, up from 3.3%, where the measure had remained for three consecutive months.

Persistent inflation expectations matter because they can affect how consumers behave. Households expecting prices to continue climbing may accelerate some purchases, while cutting back elsewhere as necessities consume more of their budgets.

The survey found some evidence of that behavior. Buying conditions for durable goods actually improved slightly, in part because some consumers believed making purchases now could allow them to avoid even higher prices later.

Why consumer sentiment matters

The University of Michigan survey is closely followed because consumer spending represents a major part of U.S. economic activity. The survey asks households about personal finances, business conditions and whether they believe it is a good time to make major purchases. About 1,000 interviews are conducted each month.

Weak sentiment doesn't necessarily mean consumers will immediately stop spending. But the university's research has historically found that widespread economic pessimism can lead households to postpone purchases and increase their financial reserves.

For consumers, September's survey suggests that the biggest issue remains purchasing power. Even when employment and income remain relatively stable, persistent increases in everyday expenses particularly food, fuel, housing and other necessities can make households feel financially worse off.