Consumer sentiment in the United States slipped again in September, and the sharpest change came in price expectations. The University of Michigan’s final reading for the month came in at 48.1, down from 51.7 in August and 55.1 a year earlier. Year-ahead inflation expectations rose to 4.6% from 4.0%. Because the Federal Reserve is already raising rates, that jump matters for borrowing costs and household budgets.
What the September Consumer Sentiment Survey Showed
The September decline was broad. According to the final results from the Michigan Surveys of Consumers, the current economic conditions index eased to 50.9 from 51.9, while the index of consumer expectations fell more sharply, to 46.3 from 51.5. Survey director Joanne Hsu said sentiment reached its lowest reading in four months and stood 15% below January 2026.
The preliminary estimate released September 11 was slightly weaker at 47.8, below the 51.0 economists polled by Reuters had expected. The final figure improved on that early read by only 0.3 points.
The expectations index measures how households see the months ahead, not how they feel today. Its 5.2-point drop suggests consumers expect conditions to worsen, beyond reacting to prices they already pay. Hsu noted that short-run expected business conditions “plunged amid renewed worries,” according to coverage of the release.
Why Gas Prices and Tariffs Are Weighing on Households
Energy costs sit at the center of the story. The average price of gasoline was about $4.28 per gallon at the time of the preliminary release, according to Yahoo Finance reporting, and the Bureau of Labor Statistics reported that its gasoline index was up 27.4% over the 12 months ending in August. The broader energy index rose 16.3% over the same period, pushed higher by the 2026 conflict with Iran and its effect on fuel markets.
Survey responses reflect that pressure directly. Some 31% of consumers spontaneously mentioned gasoline prices in September, and 55% said high prices were hurting their personal finances, up from 44% a year earlier. Unprompted mentions of tariffs rose to 35% from 24% in July, a sign that trade policy has returned as a household concern. Hsu summarized the mood by saying consumers “do not believe that relief from high gas prices is on the horizon.”
The New Boston previously examined how gas prices weigh on confidence, noting that fuel is one of the most visible prices households pay. September’s survey shows that pressure has not eased.
Why Inflation Expectations Matter More Than the Headline
For policymakers, the most closely watched line in the report is not the sentiment index but inflation expectations. Year-ahead expectations of 4.6% are the highest since June and well above the 3.4% recorded in February, before the conflict began. Long-run expectations edged up to 3.4% from 3.3%, above the 2.8% to 3.2% range that prevailed through 2024.
Expectations can shape behavior. If workers and businesses assume prices will keep rising quickly, they may push for higher wages and set higher prices, which can make inflation more persistent. Central banks generally treat stable long-run expectations as evidence that a price shock will fade on its own.
Measured inflation is running below what consumers expect. The BLS reported that the Consumer Price Index rose 3.4% over the 12 months ending in August, while core prices, which exclude food and energy, rose 2.4%. The 1.2-point spread between expected and actual inflation suggests households are weighting fuel costs heavily in their outlook.
What the Data Could Mean for the Federal Reserve
The Federal Reserve raised its benchmark rate to a range of 3.75% to 4% at its September meeting, as reported by CNBC. Rising consumer inflation expectations give officials another reason to keep policy tight, because the Fed’s credibility depends partly on keeping those expectations anchored.
The case for restraint is also real. Core inflation stood at 2.4% in August, and the economy grew at an annualized 1.5% in the second quarter, down from 3.8% growth a year earlier. One reading is that the jump in expectations is a temporary reaction to fuel prices that would reverse if energy costs ease. The opposing risk is that months of elevated readings, combined with gas prices that remain high, allow expectations to become entrenched.
Sentiment Versus Spending: A Familiar Disconnect
Weak consumer sentiment does not always translate into weak spending. TD Economics noted in June that consumer spending remained relatively resilient in early 2026 even as the Michigan index hit a record low in May. Its analysis attributed much of that resilience to higher-income households, whose discretionary spending masked strain among lower earners.
That split helps explain the September numbers. TD reported that wage growth for the bottom quartile of earners, at 3.7%, trailed headline inflation earlier in the year, and that the personal saving rate had slipped to about 2.6% in April. Households with thinner cushions tend to feel energy shocks first and hardest. Only 8% of Michigan respondents in September expected their incomes to outpace inflation over the next year.
Survey responses also vary by political affiliation, which can amplify swings. In the preliminary September reading, sentiment fell among both Democrats and Republicans while holding roughly steady among independents, so the decline was not confined to one group.
What to Watch Next
The September consumer sentiment data point to households that expect higher prices and tighter budgets, even though measured core inflation remains more moderate. Whether that gap closes depends largely on energy prices. The next signals arrive quickly: August personal consumption expenditures data are scheduled for September 30, and preliminary October sentiment results are due October 9. A further rise in long-run inflation expectations above 3.4% would be the clearest sign that the energy shock is shaping broader price expectations.
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