US Consumer Sentiment Falls Sharply in September on Inflation Woes

U.S. consumer sentiment sank to a four-month low in September as growing inflation pressures continue to weigh on the economic outlook.

Released Sept. 11, the University of Michigan’s preliminary September Consumer Sentiment Index declined almost 8 percent to 47.8, from 51.7 in August.

This represented the weakest reading since May’s record low and came in well below economists’ estimates.

While views of current economic conditions dipped slightly by 2 percent, year-ahead expectations for business conditions and personal finances fell sharply by 11 percent.

“With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come,” Joanne Hsu, director of consumer surveys, said in a news release.

Crude oil prices rocketed this week on worries that the U.S.–Iran conflict will escalate following a series of retaliatory strikes between Washington and Tehran in recent weeks.

With the U.S. and global benchmarks hovering around $100 a barrel, motorists are facing greater pain at the pump.

As of Sept. 11, the national average for a gallon of gasoline is almost $4.30, up about 15 cents from a week ago, according to the American Automobile Association.

Diesel prices also blew past $6 per gallon for the first time ever, driven in part by the intensifying Ukraine-Russia war that has damaged refining infrastructure.

“Diesel is the silent driver of inflation,” Oliver Rust, head of data at Truflation, told The Epoch Times.

“Every product on a supermarket shelf got there on a truck powered by diesel, so higher diesel costs inevitably bleed into goods and some services, even if crude oil prices later come down.”

New consumer and producer inflation figures show that the uptick has been fueled almost entirely by oil, gasoline, and diesel.

August’s annual inflation rate was unchanged at 3.4 percent, and it rose 0.4 percent month over month. Approximately one-third of last month’s jump was driven by gasoline, the Bureau of Labor Statistics said in the Consumer Price Index report.

Wholesale inflation, meanwhile, climbed 0.4 percent in August, led by a more than 24 percent spike in diesel fuel.

Excluding food and energy, however, core inflation has been stable. The 12-month core inflation rate decelerated to 2.4 percent, its lowest level since March 2021.

Anchoring Inflation Expectations

Recent price pressures influenced consumers’ inflation outlook.

Year-ahead expectations advanced to 4.6 percent, from 4 percent, the University of Michigan reported. The five-year forecast ticked up to 3.4 percent, from 3.3 percent.

“The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings,” Hsu said.

Despite consumers’ higher short- and long-term inflation expectations, they remain anchored across financial markets.

The five-year breakeven inflation rate is still only slightly above the U.S. central bank’s 2 percent target, according to the Federal Reserve Bank of St. Louis.

Still, after firm August inflation data, Wall Street is betting that the central bank will raise interest rates at next week’s policy meeting.

New CME FedWatch data suggest an 85 percent chance of a quarter-point rate hike.

But while a rate increase could affect the broader economy, consumers could weather tighter monetary policy, says Jeffrey Roach, chief economist for LPL Financial.

“A growing share of economic activity is less interest-rate sensitive, much as it was during the 2022-23 hiking cycle,” Roach said in an emailed note to The Epoch Times. “With AI investment surging and boomers and affluent consumers continuing to spend on travel, demand could remain resilient despite tighter policy.”

August retail sales—scheduled for release on Sept. 16—are projected to rebound after an unexpected decline last month.