Consumer confidence is weakening again, and the shift is paired with a rise in inflation expectations. The University of Michigan’s preliminary September sentiment index fell to 47.8 from 51.7 in August, below economists’ expectations.
Households now expect prices to rise 4.6% over the next year, up from 4.0% in August. Five-year expectations also edged higher to 3.4%.
Gasoline prices and trade tensions were major contributors. Pump prices make inflation visible every few days, not once a month in a government release, and expectations can influence wage demands, spending and pricing behavior.
For the Federal Reserve↗, worsening expectations complicate policy even if parts of the economy are slowing. Officials care not only about current inflation but whether people believe higher inflation will persist.
For a household budget, the useful message is direction rather than panic: fuel, financing costs and imported goods are under pressure at the same time, so keeping cash flexibility has more value than assuming recent price stability will continue.
The University of Michigan’s preliminary September sentiment index fell to 47.8 from 51.7 in August. One-year inflation expectations rose to 4.6% from 4.0%, with gasoline prices and trade tensions weighing on households.