University of Michigan Consumer Sentiment fell from 51.7 to 47.8 in September, well below the 51.0 consensus and marking a second consecutive monthly decline. The deterioration was concentrated in expectations: Consumer Expectations dropped from 51.5 to 45.8, an 11.1% monthly fall, while Current Economic Conditions eased from 51.9 to 50.9. Sentiment is now 13.2% below its level a year ago.
Surveys of Consumers Director Joanne Hsu said year-ahead expectations for both personal finances and business conditions “plunged,” with consumers anticipating greater pressure on their finances amid a resurgence in fuel prices and trade tensions. The weakness was broad politically, with sizable declines among both Democrats and Republicans, while independents were little changed. Five-year expectations for business conditions were more stable, suggesting consumers did not see September’s deterioration as a further worsening of the longer-run outlook.
Inflation expectations moved in the opposite direction. Year-ahead inflation expectations jumped from 4.0% to 4.6%, the highest since June and above the 3.4% reading seen in February before the Iran conflict. Five-year inflation expectations edged from 3.3% to 3.4%, ending three consecutive months at 3.3%. The September survey therefore combines sharply weaker consumer expectations with renewed near-term inflation concern, reinforcing the squeeze from higher fuel costs and trade-related price pressures rather than pointing to a straightforward deterioration in current conditions alone.
Data Summary
| Indicator | Previous | Current | Expected |
|---|---|---|---|
| UoM Consumer Sentiment | 51.7 | 47.8 | 51.0 |
Components
| Component | Previous | Current | Change |
|---|---|---|---|
| Current Economic Conditions | 51.9 | 50.9 | -1.9% m/m |
| Consumer Expectations | 51.5 | 45.8 | -11.1% m/m |
| 1-Year Inflation Expectations | 4.0% | 4.6% | Higher |
| 5-Year Inflation Expectations | 3.3% | 3.4% | Higher |
The deterioration was concentrated in the forward-looking expectations index rather than current conditions, while both short- and long-term inflation expectations increased.
Key Takeaways
- University of Michigan Consumer Sentiment fell from 51.7 to 47.8, substantially below the 51.0 consensus and marking a second consecutive monthly decline.
- Consumer Expectations plunged from 51.5 to 45.8, an 11.1% monthly fall, while Current Economic Conditions slipped only from 51.9 to 50.9.
- Overall sentiment was 13.2% lower than a year earlier, while Current Conditions were down 15.7% y/y and Expectations 11.4%.
- Surveys of Consumers Director Joanne Hsu said expectations for personal finances and business conditions fell sharply as consumers anticipated greater pressure from higher fuel prices and trade tensions.
- One-year inflation expectations jumped from 4.0% to 4.6%, the highest since June and well above the 3.4% level seen in February before the Iran conflict.
- Five-year inflation expectations rose from 3.3% to 3.4%, ending three consecutive months at 3.3%.
- The report therefore presents an uncomfortable combination of weaker confidence and higher inflation expectations, driven primarily by worsening expectations rather than a collapse in consumers’ assessment of current conditions.
