U.S. consumer sentiment drops to lowest point since May

Consumer sentiment took a hit in September, dropping to its lowest level since May as the impact of tariffs on product prices became more evident. The University of Michigan’s preliminary September sentiment index fell by 4.8% to 55.4 from 58.2 in August, indicating growing concerns among consumers.

According to Joanne Hsu, director of the Surveys of Consumers at the University of Michigan, consumers are increasingly wary of the economy’s vulnerabilities, including risks to business conditions, labor markets, and inflation. The looming threat of tariffs is a major concern for many Americans, with approximately 60% of consumers mentioning it in interviews.

Inflation expectations for the year remained stable at 4.8%, but long-term inflation expectations saw a rise for the second consecutive month, reaching 3.9% in September. High Frequency Economics analysts noted that consumers are starting to grasp the implications of tariffs on their finances, leading to a heightened awareness of price increases.

A study conducted by the University of Michigan on trade policy and consumer spending revealed that a majority of U.S. adults intend to reduce their spending on goods impacted by tariff-related price hikes. Only 24% of consumers surveyed expressed willingness to maintain their usual spending levels on items with significant price increases.

The uncertainty surrounding tariffs, economic policies, and immigration is casting a shadow on consumer sentiment, according to analysts at High Frequency Economics. Rising consumer prices and the tangible effects of tariffs are beginning to resonate with consumers, prompting concerns and apprehension.

Low-income households, in particular, are feeling the brunt of tariffs as a regressive tax, making them more susceptible to financial strain. These households are unlikely to benefit from recent stock market gains and are likely to experience the full impact of tariff-induced price hikes. Oxford Economics analysts predict that tariffs and changes in fiscal policy will further deepen the divide among American consumers.

Overall, consumer sentiment is on a downward trend, reflecting the growing unease among Americans regarding the economic landscape shaped by tariffs and policy changes. As consumers grapple with the reality of higher prices and economic uncertainties, their spending habits and confidence are expected to be significantly impacted in the coming months.