U.S. consumer confidence unexpectedly drops sharply; September index falls to 47.8 as inflation expectations rise to 4.6%
According to news from Zhihu Finance APP, as gasoline prices rise and trade tensions escalate again, concerns about the cost of living among U.S. consumers have further intensified. The preliminary survey released by the University of Michigan on Friday shows that the U.S. Consumer Sentiment Index in September fell to 47.8 from 51.7 in August, lower than the expectations of all economists surveyed. Meanwhile, short-term inflation expectations among consumers have risen significantly, and expectations for interest rate increases over the next year have reached their highest level since 2023.
Specifically, U.S. consumers expect prices to rise by 4.6% over the next year, significantly higher than 4.0% in August; long-term inflation expectations for the next 5 to 10 years rose slightly to 3.4%. Both short-term and long-term inflation expectations recorded a simultaneous increase, indicating that persistently rising energy prices are rekindling U.S. consumer concerns about inflation.
With the ongoing U.S.-Iran war, gasoline prices in the United States have recently climbed again, reaching the highest level for any September on record. The continuously rising cost of refueling is eroding real income for American households and further deepening consumer dissatisfaction with persistently high living costs.
Another data released earlier on Friday shows that the U.S. Consumer Price Index (CPI) rose 3.4% year-on-year in August; the core CPI, excluding food and energy, rose 0.3% month-on-month, indicating that U.S. inflationary pressures persist.
Against this backdrop, there has also been a significant shift in consumer expectations regarding the interest rate outlook. The survey shows that, for the first time since 2023, over half of U.S. consumers expect interest rates to rise over the next year. As the Federal Reserve takes action to curb inflation, consumers' concerns about further increases in borrowing costs have grown accordingly.
American consumers are also more pessimistic about the overall economic outlook. In September, consumer views on the economic situation over the coming year deteriorated to the lowest level since July 2022.
Looking at the sub-indices, the current conditions index in September fell slightly from 51.9 in August to 50.9; however, the expectations index, reflecting future economic prospects, dropped significantly from 51.5 to 45.8. At the same time, consumers' evaluations of both their current financial situation and future financial prospects also declined, indicating rising economic pressure at the household level.
It is worth noting that recent U.S. employment data still show some resilience. Reported by the U.S. Bureau of Labor Statistics last week, job growth in August accelerated significantly, and the unemployment rate remained stable, suggesting labor market momentum may be stronger than previously expected. However, the number of job openings remains at a relatively subdued level, while initial jobless claims continue to hover around historic lows, indicating that the U.S. job market continues to display an obvious pattern of “low hiring and low layoffs.”
The deterioration in consumer confidence is not limited to any particular political group. The University of Michigan survey shows that confidence among both Democratic and Republican consumers declined. Of special note, only 35% of Republican consumers believe the government is performing well economically, the lowest level since President Trump returned to the White House last year.
Joanne Hsu, director of the University of Michigan consumer survey, stated: “This month, consumers' evaluations of government economic policy deteriorated by about 10%, and remain significantly lower than in February 2026, prior to the outbreak of the Iran conflict.” She further pointed out that even Republican consumers, who usually more strongly support current government economic policy, showed a notable decline in recognition of related policy this month.
Overall, although the U.S. labor market maintains a certain level of resilience, rising gasoline prices, persistent inflationary pressures, and renewed trade tensions are simultaneously weakening consumer confidence in the current economy and future prospects. In particular, inflation expectations for the coming year jumped from 4.0% to 4.6%, and the majority of consumers now expect interest rates to rise further, highlighting that high living costs and high borrowing costs are once again becoming key factors influencing U.S. consumer sentiment.
This survey by the University of Michigan collected responses from August 25 to September 7.
