Consumer sentiment falls as rising gas prices weigh on wallets, inflation expectations tick up

Consumers report feeling more dour about the US economy as rising gas prices and trade tensions weigh on personal finances and business outlooks, according to a new survey from the University of Michigan.

A preliminary reading showed consumer sentiment fell to 47.8 this month, down from 51.7 in August and below economists' expectations of 51. The gauge marked the second consecutive month of worsening sentiment.

Notably, inflation expectations for the next 12 months jumped to 4.6% from 4% last month, increasing to the highest level since June. Longer-run inflation expectations also edged higher to 3.4%.

"With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come," survey director Joanne Hsu said.

The survey's results came after the latest Consumer Price Index (CPI) report showed prices remained sticky in August, rising 0.4% month over month and 3.4% year over year, driven by higher energy costs.

The war in Iran and the subsequent surge in energy prices have taken a toll on how consumers feel about the economy. After hitting a record low in May , sentiment remains 16% below where it was in February, before the conflict in the Middle East began.

Rising gas prices, in particular, have been a key concern that consumers have raised this year as they confront higher fuel costs plastered on towering gas station signs. The cost of gas spiked 3.9% last month as the war in Iran rekindled, and Americans now pay an average of $4.28 a gallon at the pump, according to GasBuddy.

Despite reporting more pessimistic attitudes about economic conditions, Americans continue to spend. They also plan to keep spending at similar levels as last year this holiday season.