US consumer confidence unexpectedly plummeted, the index fell to 47.8 in September, and inflation expectations jumped to 4.6%

Specifically, American consumers expect prices to rise 4.6% in the next year, significantly higher than the 4.0% in August; long-term inflation expectations for the next 5 to 10 years will rise slightly to 3.4% from the previous level. Short-term and long-term inflation expectations are rising at the same time, indicating that rising energy prices are reinforcing US consumers' concerns about inflation.

As the war between the US and Iran continues, US gasoline prices have recently risen again and hit the highest level in September of previous years. Rising fuel costs are eroding the actual income of American households and further increasing consumer dissatisfaction with the continuing high cost of living.

Another data released earlier on Friday showed that the US consumer price index (CPI) rose 3.4% year on year in August; after excluding food and energy, the core CPI rose 0.3% month-on-month, indicating that inflationary pressure in the US still exists.

In this context, consumers' views on interest rate prospects have also changed markedly. According to the survey, for the first time since 2023, more than half of US consumers expect interest rates to rise in the next year. As the Federal Reserve acted to curb inflation, consumer concerns about further rising borrowing costs grew.

American consumers are also more pessimistic about the overall economic outlook. In September, consumers' views on the economic situation in the coming year worsened to the lowest level since July 2022.

Looking at the sub-indicators, the September Current Situation Index fell from 51.9 in August to 50.9, a relatively limited decline; however, the expected index reflecting future economic prospects fell sharply from 51.5 to 45.8. At the same time, consumers' evaluations of their current financial situation and future financial prospects have declined, indicating that economic pressure at the household level is increasing.

It is worth noting that recent US employment data still shows some resilience. According to data released by the US Bureau of Labor Statistics last week, employment growth accelerated sharply in August, and the unemployment rate remained stable, indicating that the momentum of the labor market may be stronger than previously anticipated. However, the number of job vacancies is still at a relatively low level, while the number of first-time jobless claims remains near a historically low level, which means that the US job market still shows clear characteristics of “low recruitment and low layoffs.”

Nor is the decline in consumer confidence limited to a specific political camp. According to the University of Michigan survey, consumer confidence in both Democrats and Republicans declined. What is particularly noteworthy is that only 35% of Republican consumers believe that the government is performing well economically, the lowest level since US President Trump returned to the White House last year.

Joanne Hsu, head of consumer research at the University of Michigan, said, “Consumer evaluations of the government's economic policies deteriorated by about 10% this month, and are still significantly below the level in February 2026, which is before the outbreak of the Iranian conflict.” She further pointed out that even among Republican consumers who are generally more supportive of the current administration's economic policies, there has been a marked decline in approval of relevant policies.

Overall, although the US labor market remains resilient, rising gasoline prices, continued inflationary pressure, and renewed trade tension are simultaneously weakening consumers' confidence in the current economy and future prospects. In particular, inflation expectations for the next year jumped from 4.0% to 4.6%, and most consumers are beginning to expect interest rates to rise further, indicating that high living costs and high borrowing costs are once again becoming an important factor affecting US consumer sentiment.

The University of Michigan survey collected feedback from respondents from August 25 to September 7.