US Consumer Sentiment Slides on Higher Gas, Trade Tensions

(Bloomberg) -- US consumer sentiment fell in early September as higher gasoline prices and renewed trade tensions heightened affordability concerns.

The University of Michigan's preliminary sentiment index decreased to 47.8 in September from 51.7, according to the survey released Friday, below all estimates in a Bloomberg survey of economists.

Consumers expect prices to rise 4.6% over the next year, a jump from 4% in the previous month. They also saw costs rising at an annual rate of 3.4% over the next five to 10 years, slightly more than what consumers estimated in August.

Consumer sentiment continued to slide as gasoline prices have turned higher, hitting the highest price ever for September as the war with Iran continues. Higher prices at the pump have eroded Americans' paychecks and compounded frustrations about the cost of living.

Separate data out earlier Friday showed consumer prices rose 3.4% in August from a year earlier. On a monthly basis, consumer prices excluding food and energy rose 0.3% in August from a month earlier.

For the first time since 2023, a majority of consumers expect interest rates to rise in the year ahead as the Federal Reserve moves to curb inflation.

Consumers' views about the economy in the year ahead also deteriorated in September to the lowest reading since July 2022.

US job growth surged in August and the unemployment rate held steady, according to Bureau of Labor Statistics data released last week, suggesting the labor market has more momentum than previously thought. Other data -- like the subdued level of job openings and historically low applications for unemployment insurance -- suggest the labor market remains in a low-hire, low-fire mode.

Sentiment sank among consumers from both political parties, according to the survey, and only 35% of Republicans believe the government is doing a good job with the economy, the lowest reading since President Donald Trump returned to the White House last year.

"Opinions of the government's economic policy worsened about 10% this month and remain substantially below February 2026, just prior to the Iran conflict,'' Joanne Hsu, director of the survey, said in a statement. "Notably, even Republicans, who generally supported economic policy under the current administration, have exhibited a marked decline in favorability.''