Consumer sentiment falls in September for two consecutive months. The final September reading for the University of Michigan Consumer Sentiment Index came in at 48.1. This marks a 7.0% (3.6 points) decrease from August. Consumer sentiment sits 12.7% below where it was a year ago and is currently below the 1st percentile in the series' history.
Key Takeaways
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The University of Michigan Consumer Sentiment Index final reading fell to 48.1 in September, a 7.0% decrease from August.
- The Current Economic Conditions Index fell 1.9% to 50.9, while the Consumer Expectations Index fell 10.4% to 46.3.
- Year-ahead inflation expectations increased from 4.0% to 4.6% from August.
Joanne Hsu, the director of surveys, made the following comments:
Consumer sentiment ticked down less than four index points in September, reaching the lowest reading in four months and down 15% from January 2026. Views of current and year-ahead expected personal finances both weakened about 10% this month, with concerns over high prices continuing to climb. Buying conditions for durables improved a bit, in part due to a perception that completing such purchases now would help consumers avoid higher prices in the future. The short-run outlook for business conditions plunged amid renewed worries that elevated fuel prices and re-escalating trade disputes could pass through to the economy as a whole. Overall, interviews reveal broad agreement across the political spectrum that the outlook for the economy has weakened since the beginning of the year. After particularly large declines in sentiment this month, Republican sentiment is now 20% lower than January 2026; Democrats are down 13% over the same period.
Background on the University of Michigan Consumer Sentiment Index
The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the U.S. with regards to the economy, personal finances, business conditions, and buying conditions, conducted by the University of Michigan. There are two reports released each month; a preliminary report released mid-month and a final report released at the end of the month.
The chart below provides a long-term perspective on this widely watched indicator. We have highlighted the index's value at the start of each recession. The current level of 48.1 is below the index's value at the start of all six recessions since its inception.
To put today’s report in historical context, consumer sentiment is currently 42.5% below its average reading of 83.6 (arithmetic mean) and 41.6% below its geometric mean of 82.3, based on data dating back to 1978.
To visualize the volatility and its impact on the broader economy, the following chart includes a three-month moving average and real GDP. Historically, prolonged periods where the moving average remains at these depressed levels have closely correlated with negative GDP growth (the red bars below).
The Political and Presidential Lens of Consumer Sentiment
Each month, the survey results highlight sentiment within each political party. Sentiment is often viewed through a partisan lens, but the data shows that sentiment has fluctuated both positively and negatively under both Republican and Democratic administrations. As the chart below illustrates, the current "plunge" is a rare moment of bipartisan agreement, with declines seen across the political spectrum as energy costs hit every household.
University of Michigan Consumer Sentiment Index: Components
The Michigan Consumer Sentiment Index consists of two sub-indexes: the Current Economic Conditions Index (CECI) and the Consumer Expectations Index (CEI). The CECI reflects consumers' views of their current financial situation and the overall economy, while the CEI gauges their outlook for the future.
Current Economic Conditions Index (CECI)
The Current Economic Conditions Index fell to 50.9. This represents a 1.9% decrease from the previous month and a 15.7% drop from a year ago. The latest reading was in line with preliminary results.
Consumer Expectations Index (CEI)
The Consumer Expectations Index fell to 46.3. This represents a 10.1% decrease from the previous month and a 10.4% drop from one year ago. The latest reading was higher than the preliminary result of 45.8.
University of Michigan Consumer Sentiment Index: Inflation Expectations
Year-ahead inflation expectations jumped from 4.0% last month to 4.6% this month, the highest reading since June. The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations ticked up to 3.4%, ending three consecutive months at 3.3%. These expectations remain higher than their 2024 range of 2.8% to 3.2%.
The next update to this report will be published on October 9th.
Other Sentiment Indicators
For an additional perspective on consumer attitudes, see the most recent Conference Board's Consumer Confidence Index. Both indexes gauge consumer attitudes toward the current and future strength of the economy. However, the Consumer Confidence Index is more influenced by employment and labor market conditions while the Michigan Sentiment Index is more focused on household finances and the impact of inflation.
The Conference Board index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan index.
And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB business optimism Index (monthly update here).
ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).
Read more updates by Jen Nash
