Consumer Sentiment Deteriorates Amid Inflation, Employment Worries, Survey Shows

12:44 PM EDT, 09/26/2025 (MT Newswires) -- US consumer sentiment dropped in September amid concerns regarding the prospects of higher inflation and labor market deterioration, final survey results from the University of Michigan showed Friday.

The main sentiment index fell to 55.1 this month from 58.2 in August, lower than the initial reading of 55.4, which was the consensus in a Bloomberg poll. Still, sentiment continues to be above the low readings seen in April and May, Surveys of Consumers Director Joanne Hsu said.

"Not only did macroeconomic expectations fall, particularly for labor markets and business conditions, but personal expectations did as well, with a softening outlook for (consumers') own incomes and personal finances," Hsu said. "Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year."

The gauge for current economic conditions dropped 2.1% sequentially to 60.4 in September, while the expectations measure slumped 7.5% to 51.7, the survey showed.

Year-ahead inflation expectations ticked down to 4.7% this month from 4.8% in August, while the five-year outlook rose to 3.7% from 3.5%.

Official data showed Friday that US consumer spending accelerated in August at the fastest pace since March, while the Federal Reserve's preferred inflation metric held steady on an annual basis.

"The as-expected rise in the August inflation data is likely to be interpreted by the more dovish members of the (Federal Open Market Committee) as a lack of upside surprise, further justifying the (25-basis-point) September rate cut amid a recent shift in attention to the employment side of the equation as hiring momentum continues to slow," Stifel said in a Friday note to clients.

Earlier this week, Fed Chair Jerome Powell said the central bank faces a "challenging situation," with near-term risks to inflation tilted to the upside and those to employment leaning downside. Fed Vice Chair for Supervision Michelle Bowman said recent data indicate that policymakers are at a "serious risk of already being behind the curve" in addressing a weakening labor market.

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