US consumer sentiment declined to a four-month low in September, with the University of Michigan's Consumer Sentiment Index falling to a final reading of 48.1. This represents a 7% drop from August and a nearly 13% decrease from a year ago. Economists surveyed by Reuters had anticipated the index to be around 47.6, while the preliminary reading was 47.8. This September figure marks the second-lowest on record since the survey began in 1952, indicating a mood worse than during various significant historical events such as the 1970s oil crisis, 9/11, and the Great Recession.
The primary drivers behind this slump are concerns over rising inflation eroding households' purchasing power and high gasoline prices. Households expect prices to climb 4.6% over the next year, an increase from 4.0% in August. Gas prices averaged $4.49 a gallon nationally, roughly 50% higher than when the Iran war began. Unprompted mentions of gasoline as a concern rebounded to 31% in September, with consumers seeing no end to rising pump prices. Additionally, government figures show energy costs were 16.3% higher in August than a year earlier, with gasoline accounting for over a third of August's monthly price increase.
Beyond inflation and gas prices, other factors contributing to the gloomy sentiment include renewed trade friction and higher borrowing costs. Tariffs were unprompted mentions for 35% of respondents in September, up from 24% in July. High interest rates now top the list of complaints for home purchases, displacing high prices, and have also soured views on vehicle purchases. The Federal Reserve's recent rate hike and the possibility of another in October, with a key long-term Treasury yield hitting a nearly 20-year high, further amplify these concerns. Overall inflation held at 3.4%, well above the Fed's 2% target.
Both Republican and Democratic consumers reported worsening conditions, with Republican sentiment down 20% from January and Democratic sentiment down 13% over the same period, suggesting that price worries are a cross-party concern. Although views on buying conditions for big-ticket durable goods slightly improved, this was attributed to some shoppers buying now to preempt future price hikes, indicating pulled-forward demand rather than a genuine rebound in confidence. The index is down 15% from its January level and 12.7% from September 2025.
