American families are feeling the squeeze. Consumer sentiment plummeted to its second-lowest level on record in September as soaring gas prices and persistent inflation erode household budgets and economic confidence across the country.
The University of Michigan's consumer sentiment index for September dropped to 48.1, a 7% decline from August and nearly 13% lower than a year ago. The survey, which dates back to 1952, has recorded its four lowest-ever readings within the past six months alone, with the record set in May.
Pain at the Pump Drives Economic Anxiety
Gus Faucher, chief economist at The PNC Financial Services Group, identified the culprit. "Obviously, the biggest factor is the higher gasoline prices and higher diesel prices," he said. "People see that every day when they go to fill up their car."
It's not just perception. Faucher noted that "inflation has picked up over the past year or so because of tariffs and now the conflict in Iran. The end of the conflict does not appear imminent, and I think that people are feeling frustrated and concerned."
Joanne Hsu, director of the university's Surveys of Consumers, found something striking in the data: widespread pessimism cutting across party lines. "Overall, interviews reveal broad agreement across the political spectrum that the outlook for the economy has weakened since the beginning of the year," she said. Republican sentiment has fallen 20% since January 2026, while Democrats are down 13% over the same period.
Inflation Expectations Climb Higher
The survey revealed troubling trends in how Americans expect prices to behave. Year-ahead inflation expectations jumped to 4.6% from 4% in August, marking the highest reading since June. Before the Middle East conflict began, those expectations stood at just 3.4%.
Long-run expectations also ticked upward to 3.4%, breaking three consecutive months at 3.3% and rising above the 2024 range of 2.8% to 3.2%. These figures matter enormously to policymakers at the Federal Reserve, which monitors consumers' expectations about future price hikes closely as it charts monetary policy.
The Fed hiked interest rates earlier this month for the first time in three years, responding to inflation pressures that continue to squeeze working families. Reuters reported that a week of jobs and inflation data could test expectations for the US rate path going forward.
The final reading for September showed a slight improvement from preliminary readings, offering little comfort to households watching their purchasing power diminish month after month.
Why This Matters:
When consumer sentiment hits historic lows, it reflects real economic pain in American households. Families making tough choices between filling gas tanks and paying bills aren't abstract statistics—they're the human cost of policy decisions around tariffs, energy markets, and international conflicts. Rising inflation expectations create a dangerous cycle: when people expect prices to keep climbing, they change spending behavior in ways that can make inflation worse. The Federal Reserve's interest rate hikes aim to cool inflation, but higher borrowing costs also slow job creation and wage growth, potentially hitting workers hardest. With economic pessimism crossing party lines and sentiment at near-record lows, the data suggests systemic problems requiring coordinated policy responses—not just monetary tightening, but potentially action on energy costs, supply chains, and geopolitical stability that shapes commodity markets.