University of Michigan Consumer Sentiment Index Hits Lowest Level Since May

In September 2025, the University of Michigan's Consumer Sentiment Index declined to 55.4, down from 58.2 in August, marking the lowest level since May. This downturn reflects growing consumer concerns over worsening business conditions, a softening labor market, and persistent inflation pressures.

The Consumer Sentiment Index, a key indicator of consumer confidence, is derived from monthly surveys assessing personal financial situations, buying conditions, and expectations for the economy. The recent decline suggests a weakening outlook for personal finances and heightened apprehension about future economic stability.

Joanne Hsu, director of the Surveys of Consumers, noted, "Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets, and inflation." She added that current and expected personal finances both eased about 8% this month.

Inflation expectations remain elevated, with the one-year outlook steady at 4.8% and the five-year expectation rising to 3.9% from 3.5% in August. These figures indicate that consumers anticipate sustained price pressures in the coming years.

The decline in sentiment was observed across various demographic groups, including age, income, and education levels, indicating widespread concern about the economy's trajectory.

This downturn follows a series of fluctuations in consumer sentiment throughout 2025. In March, the index fell by about 11% to 57.9, the lowest level since fall 2022, reflecting growing pessimism about the economic outlook. Factors contributing to this decline included new tariffs, federal cutbacks, erratic policies, and a slumping stock market.

The recent decline in consumer sentiment carries significant implications for the U.S. economy. Historically, lower confidence levels correlate with reduced consumer spending, which could slow economic growth if the trend persists. Additionally, the rise in inflation expectations may influence the Federal Reserve's monetary policy decisions.

Understanding these dynamics is crucial for policymakers and businesses as they navigate the challenges posed by shifting consumer confidence and economic indicators.