More American consumers are feeling less confident about the state of the U.S. economy, according to the preliminary results of the closely watched monthly survey by the University of Michigan.
The Consumer Sentiment Index declined to 55.4 in September, down from 58.2 in August, representing a 21 percent decrease from the same time last year.
Joanne Hsu, the survey’s director, noted that consumers continue to observe growing risks in employment conditions, inflation, and business conditions, driven by concerns about trade policy.
“This month’s easing in economic views was particularly strong among lower and middle income consumers. Buying conditions for durables improved, while all other index components fell,” Hsu stated.
The index measuring current economic conditions was little changed from a month ago and slipped 3.3 percent year over year.
Consumer expectations fell to 51.8 from 55.9, down by more than 30 percent from a year ago.
“Trade policy remains highly salient to consumers, with about 60 percent of consumers providing unprompted comments about tariffs during interviews, little changed from last month,” Hsu added.
Despite rising concern about the economy’s health, these numbers are higher than the peaks of uncertainty in April and May.
The inflation outlook, meanwhile, remained steady in the preliminary survey data.
One-year inflation expectations were flat at 4.8 percent. Long-run inflation projections moved up for the second consecutive month to 3.9 percent.
The U.S. economy will receive another update on the state of consumers next week when the Census Bureau releases August retail sales data.
Following a 0.9 percent drop in May, retail sales rebounded by 0.9 percent in June and 0.5 percent in July. The market consensus suggests a 0.3 percent increase.
Scanning the Economy
U.S. households have been concerned about the broader economic landscape throughout 2025, attributing these fears to President Donald Trump’s global tariffs agenda, which they believe will raise prices and cost jobs. In addition to the University of Michigan’s series, other surveys have reported deteriorating sentiment and downbeat outlooks.
The Federal Reserve Bank of New York’s Survey of Consumer Expectations for August showed median inflation expectations ticking up to 3.2 percent from 3.1 percent. The three- and five-year horizons were unchanged at 3 percent and 2.9 percent, respectively.
While inflationary pressures have gradually appeared in the data, tariffs have yet to have a substantial impact on consumer prices.
According to the Bureau of Labor Statistics, the headline annual inflation rate rose to 2.9 percent last month from 2.7 percent in July. The 12-month core inflation rate, which excludes volatile energy and food prices, remained unchanged at 3.1 percent.
On a monthly basis, the consumer price index (CPI) jumped at a higher-than-expected pace of 0.4 percent, and the core CPI rose by 0.3 percent.
But experts say tariff-related prices could be working their way through the U.S. marketplace.
“Tariff costs are gradually working their way from port to warehouse to checkout aisle. Core goods prices excluding food and energy fell in 2024, but are rising again in 2025 as imported goods become more expensive,” Bill Adams, chief economist at Comerica Bank, said in a note emailed to The Epoch Times.
Last month’s data for tariff-sensitive items presented a varied picture.
Apparel prices, for example, increased by 0.5 percent, while new-vehicle prices saw a more modest rise of 0.3 percent. Televisions experienced the most significant growth, with a 2.5 percent uptick. Appliance prices edged up by 0.4 percent. Subsequently, smartphones recorded a slight decline of 0.2 percent. Toy prices decreased by 0.8 percent, whereas canned fruits and vegetables registered a 0.5 percent increase.
Looking ahead to the September inflation data, the Cleveland Fed’s Inflation Nowcasting Model anticipates that the annual inflation rate will reach 3 percent for the first time since January. The monthly CPI is also expected to climb by 0.4 percent.
“The hot CPI report is an argument for the Fed to ‘proceed carefully’ with rate cuts, as Chair [Jerome] Powell put it in his speech at the Jackson Hole monetary policy conference in August,” Adams added.
The Federal Reserve will convene its two-day Federal Open Market Committee (FOMC) policy meeting next week. Investors overwhelmingly forecast a quarter-point interest rate cut as officials place a renewed focus on the national labor market.
New Department of Labor data revealed weekly jobless claims—the number of individuals filing new applications for unemployment benefits—unexpectedly soared to 263,000 for the first time in almost four years.
For months, two key central bank policymakers—Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman—have advocated for lower interest rates amid signs of deteriorating employment conditions.
Speaking at the Economic Club of Miami last month, Waller stated that the rate-setting FOMC should not wait for further weakness in the labor market before adjusting policy lower, urging his colleagues to see through tariff-related noise.
“Based on all the data in hand, I believe this argument is even stronger today, and that the downside risks to the labor market have increased,” Waller, a candidate to replace Powell next year, said at an Aug. 28 event.
“While I believe we should have cut in July, I am still hopeful that easing monetary policy at our next meeting can keep the labor market from deteriorating while returning inflation to the FOMC’s goal of 2 percent. So, let’s get on with it.”
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