US Consumer Sentiment Drops In September, Inflation Expectations Fall Sharply

Consumer confidence in the United States experienced a setback in September, as the recent surge in inflation data for August, which exceeded expectations, dampened the previously positive household morale.

Preliminary estimates from the University of Michigan reveal that consumer sentiment fell from 69.5 in August to 67.7 in September, missing expectations that were set at 69.1.

Despite the decline in consumer sentiment, the gauge remains above the six-month moving average, which stands at 64.62, showcasing a resilient optimistic outlook among U.S. households.

In terms of consumer expectations, the gauge came in at 66.3 for September, slightly up from the previous month’s reading of 65.5. It also topped expectations of 66.

Additionally, the subindex measuring current conditions saw a notable drop from 75.7 in August to 69.8 in September, missing expectations set at 75.3.

Expectations for inflation over the next year fell sharply from 3.5% to 3.1%. Looking further ahead, the 5-year inflation outlook is at 2.7%, indicating a belief among consumers that inflationary pressures might be more transitory in nature.

“Sentiment this month was characterized by divergent movements across index components and across demographic groups with little net change from last month. Notably, though, both short-run and long-run expectations for economic conditions improved modestly this month, though on net consumers remain relatively tentative about the trajectory of the economy,” Surveys of Consumers Director Joanne Hsu said.

Stocks negatively reacted to the consumer sentiment data, with the SPDR S&P 500 ETF Trust SPY down 0.7% at the time of writing Friday.

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