Consumer sentiment falls to 4-month low as concerns over inflation mount

Consumer sentiment fell in September as higher grocery and gas prices weighed on Americans' views of the economy, according to a survey from the University of Michigan.

Overall consumer sentiment fell to 48.1 in September, down from August's 51.7, as consumers' expectations for their personal finances weakened by about 10%. The reading was slightly above the Street's expectation of 47.5.

"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," Joanne Hsu, the survey's director, said in the release.

Following talks that had collapsed between the US and Canada in late August, President Trump placed 50% tariffs on about $20 billion worth of Canadian goods. This week, Treasury Secretary Scott Bessent announced that the US and China would extend their current trade truce, with talks set to continue in early 2027.

Hsu added that consumers' outlook for the economy has weakened across the political spectrum since the start of the year.

As inflation remained elevated in August and the war with Iran continues, Americans' outlook for inflation in the year ahead jumped to 4.6% in September from 4% in August, marking the highest reading since June.

It's also far higher than inflation expectations of 3.4% seen in February and all readings in 2024.

Gas prices have increased by more than $1.50 on average since the beginning of the war, according to AAA , and are now creeping toward $5 per gallon nationwide. In California, average prices are above $6 per gallon.

Long-term inflation expectations increased to 3.4% in September, ending three consecutive months at 3.3%. In recent months, they have consistently remained above the 2.8%-3.2% range seen in 2024.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @ BrookeDiPalma or email her at bdipalma@yahoofinance.com.