American families are feeling worse about their economic prospects than at nearly any point in the past 74 years, as soaring gas prices driven by the U.S.-Israeli conflict with Iran compound years of inflation-driven financial strain. The University of Michigan's consumer sentiment index plunged to 48.1 in September, down 7% from August and nearly 13% below last year's levels, according to data released Friday.
The reading represents the second-lowest level since the survey began in 1952. Americans now report greater economic pessimism than during the Vietnam War, the 1970s oil crisis, the September 11 attacks, the Great Recession, or even the COVID-19 pandemic and its inflationary aftermath.
A Year of Deepening Pessimism
The four lowest readings ever recorded have all occurred within the past six months, with May 2026 marking the historic nadir. While September's final reading showed slight improvement from preliminary data, the trajectory reveals mounting anxiety across households of all income levels.
"Overall, interviews reveal broad agreement across the political spectrum that the outlook for the economy has weakened since the beginning of the year," said Joanne Hsu, director of the university's Surveys of Consumers. Republican sentiment has fallen 20% since January 2026, while Democrats are down 13% over the same period.
Oil Conflict Compounds Inflation Burden
After navigating a once-in-a-century global pandemic, U.S. households have endured higher-than-normal inflation and the compounding effects of fast-rising prices for the past five and a half years. Those pressures intensified this year when the U.S.-Israeli war with Iran triggered a monthslong conflict that disrupted global oil supplies and sent pump prices soaring.
"Obviously, the biggest factor is the higher gasoline prices and higher diesel prices," Gus Faucher, chief economist at The PNC Financial Services Group, told CNN. "People see that every day when they go to fill up their car." He noted that consumers also hear warnings about how record diesel prices threaten to cascade through supply chains, raising costs on everyday goods. "Inflation has picked up over the past year or so because of tariffs and now the conflict in Iran," Faucher said. "The end of the conflict does not appear imminent, and I think that people are feeling frustrated and concerned."
Inflation Expectations Climb
Friday's survey revealed that consumers expect inflation to worsen both in the near and long term. Year-ahead inflation expectations jumped to 4.6% from 4% in August, the highest reading since June. Before the Middle East conflict began, those expectations stood at just 3.4%.
Long-run expectations also climbed to 3.4%, breaking three consecutive months at 3.3% and rising above the 2024 range of 2.8%-3.2%. The Federal Reserve, which closely monitors these expectations, hiked interest rates earlier this month for the first time in three years, a move that threatens to increase borrowing costs for families already stretched thin by inflation.
Why This Matters:
This collapse in consumer confidence reflects the lived reality of working families squeezed between stagnant wages and rising costs for essentials like fuel, food, and housing. When households lose faith in their economic future, they pull back on spending, threatening the broader recovery and potentially triggering job losses that hurt vulnerable workers first. The data also exposes how geopolitical conflicts and energy market volatility disproportionately burden ordinary Americans who lack the resources to absorb price shocks. With inflation expectations rising and the Federal Reserve responding with rate hikes that make mortgages and credit more expensive, policymakers face mounting pressure to protect household purchasing power through targeted relief, strategic energy policy, and investments that reduce families' vulnerability to global supply disruptions. The breadth of pessimism across party lines suggests Americans recognize these aren't individual failures but systemic challenges requiring collective action.