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U.S. consumers have grown noticeably gloomier this fall. In September 2025, both major sentiment surveys showed sharp declines in Americans’ confidence levels. The University of Michigan’s consumer sentiment index fell to 55.4 – its lowest reading since May – down from 58.2 in August. Likewise, the Conference Board’s index plunged to 98.7, the biggest one-month drop in four years. Economist Joanne Hsu, director of the Michigan survey, warned that households “continue to note multiple vulnerabilities” in the economy – rising risks in jobs, inflation and incomes – and many report their own finances are deteriorating. Conference Board analysts similarly report that Americans’ view of current job availability has slipped again, and optimism about future income gains has faded. In short, the consumer mood is darkening: higher prices and job worries have clouded Americans’ outlook.
Survey Data: September 2025 Sentiment Slumps
September’s surveys delivered the data to back up this gloom. The University of Michigan’s Survey of Consumers showed the headline Consumer Sentiment Index at just 55.4 (on a 1966=100 scale), down from 58.2 in August and the lowest since spring. Michigan’s director Joanne Hsu noted in a statement that consumers see “rising risks to business conditions, labor markets, and inflation,” and nearly 60% of households spontaneously mentioned tariffs or trade policy when asked about their biggest concerns. Indeed, the Michigan survey found Americans still expect inflation near 4–5% next year – a worry not seen in years – and many said broad import tariffs are causing prices to rise and chipping away at their purchasing power.
The Conference Board’s Consumer Confidence Index told the same story. It fell to 98.7 in September from 105.6 in August, a 6.9-point drop – the largest month-to-month fall since 2021. Conference Board senior economist Stephanie Guichard highlighted that both components of the index weakened: current conditions readings slipped (especially Americans’ view of how easy jobs are to find) and short-term expectations cooled. In her words, consumers’ appraisal of job availability declined for the eighth straight month, while their optimism about future income gains “faded slightly”. Overall, consumers in both surveys reported feeling poorer about their personal finances than in previous months. For example, Michigan’s data showed that current and future pocketbook sentiment both eased by roughly 8% in September.
In sum, both top-line surveys agree: Americans’ confidence level has slid to multi-month lows. Concerns about inflation, jobs and politics are clearly eroding the once-brighter mood seen earlier in 2025.
What’s Driving the Drop in Consumer Sentiment
A variety of factors is dragging down confidence. Surveys and experts point to a mix of rising costs, economic uncertainty and political tensions:
- Inflation and high prices: For the average Joe and Jane in America, inflation is beginning to be a problem. U.S. prices rose by about 10% in 2021, their fastest annual increase since 2008. Housing costs– that’s rent and home prices– accounted for most of that jump. Food and energy also contributed. In just August alone grocery price hikes hit 5% (food at home +6%), gasoline surged 19%. Those big jumps compounded all other forces on consumers’ budgets. But surveys by the Conference Board show that Americans still have worries. With every survey they have found people reporting repeatedly that “high prices” are their biggest anxiety, and even among basic necessities like groceries, gasoline and rent more than half of respondents say those too are major concerns.
- Rising interest rates: After years of rock-bottom borrowing costs, interest rates remain much higher than the recent past. Fed last week showed that rate cuts are imminent. Yet through late summer Federal Reserve kept its key rate in the range of 4.25-5.25%. Rapidly rising financial expenses have added to American households’ cash crunch: long-term mortgage rates recently missed getting to 6.5%, which was greater than anything experienced since around 2024. Auto and credit-card loans are pricier too. Economists warn that the combination of still-elevated inflation and interest costs is creating a “stagflation” risk – a dangerous mix that leaves consumers caught between rising prices and weaker job prospects.
- Slowing job market: In August the United States gained only 22,000 jobs (far below expectations), and the unemployment rate went back up to about 4.3% -it’s highest level in nearly four years. American in August added only 22,000 jobs (far lower than expected) and the unemployment rate rose to around 4.3%–a near four-year high. The Atlanta Fed’s jobs reports and business surveys show fewer openings and slower hiring. Consumers are taking note: both surveys reported more people saying jobs are “hard to get.” A New York Fed survey found that the share of people who think finding a new job would be hard jumped sharply, with only 44.9% thinking they could quickly get re-employed if laid off (the lowest level since 2013). In short, Americans fear job loss or stagnant wages more than they did a year ago. As Nationwide economist Ben Ayers puts it, the plunge in confidence “underscores growing pressure on many households as the labor market weakens”.
- Political and trade tensions: Uncertainty around politics and trade policy is also damping sentiment. As for trade, the imposition of punishing import tariffs by the current US Administration has only raised prices widely, yet yielded precious little in the way of gains.For example, federal data show the average tariff rate is now the highest since the 1930s, and many economists link the recent rise in inflation to these duties. Both surveys noted that tariffs and trade wars dominate consumers’ unprompted comments. One survey found about 60% of respondents mentioning tariffs when asked about economic problems. Many Americans worry that the ongoing trade fights (with China, the EU, etc.) will keep prices high. At the same time, political fighting at home contributes to unease: Americans see elections and fiscal policy as sources of risk. Research by the University of Michigan shows that people’s economic outlook is heavily shaped by partisan identity – those aligned with the party in power (President Trump’s Republican Party) usually feel more optimistic than others. Even so, by late summer both Republicans and Democrats reported growing anxiety in these surveys. In short, the political backdrop – with trade disputes, tight fiscal debates and a polarizing presidency – is adding to consumer uncertainty.
How Inflation and Interest Rates Are Pinching Households
As a result, calendars everyday are feeling more crowded Higher price headline inflation means dearer grocery notes utilities and rent: plus increases for gasoline (which is still almost 4 dollars per gallon in many places). Purchasing power for the average American family hasn ‘t kept pace. In fact, the Michigan survey made note that personal finance picture is not good: for the net percentage of households which responded they are “better off” in their finances decreased by about eight points last September. Savings are being eroded, and many consumers report having to cut back or reshuffle spending.
Interest rates compound the pain. Even though the Fed signaled future rate cuts, lending rates on mortgages, car loans and credit cards are still much higher than two years ago. For example, the average 30-year mortgage rate was around 6.5% in early September – far above the near-3% rates of 2020–21. Higher mortgage and rent costs (reflecting past rate hikes) mean less disposable income for other goods. Any remaining buyers face sticker shock, which dampens home sales and homebuilding. Businesses, aware of this pressure, have also grown cautious. As Fed Governor Chris Waller warned, Fed policy makers must balance “having to get ahead of having the labor market go down” with not fueling further inflation. In other words, consumers are caught between inflation headaches and still-high credit costs, and that combination is fraying confidence in their financial outlook.
Impact Different Income Groups
Surveys have shown lower- and middle-income families to have borne the brunt of the trouble, whereas people in better paid jobs are in effect insulated. Increasingly high gasoline, food, and rents put an even heavier burden on families already barely managing because they have to divert a far greater proportion of their earnings into these three necessities.In practical terms, big-ticket purchases have been delayed primarily by those with the least income cushion. A recent survey found that 53% of workers from households earning under $50,000 a year are postponing or cancelling a major purchase (like a home or car) because of job security fears – compared to only 34% of those earning over $100,000. Similarly, working renters (who tend to be lower-income) are almost twice as likely to hold off on big buys as working homeowners.
By contrast, higher-income and wealthier consumers report being in a stronger position. Many upper-middle-class households have higher savings or more assets (stocks, home equity) to weather a slow spell. Conference Board data for August actually showed no clear pattern by income – partly because their index captures a mix of groups – but anecdotal evidence suggests affluent consumers are less constrained. Still, if inflation keeps running higher than wages growth, eventually even the well-off will feel the pinch (in higher taxes, lower investment returns, and so on). For the moment, however, it is clear that families with less social and economic cushion feel most afraid about their futures.
Real-Life Effects: Cuts in Spending and Rising Job Anxiety
These sentiment trends are translating into concrete changes in behavior. In general, American buyers are pushing back the day when they will act. A national survey, for example, put the percentage of U.S. workers who said they have postponed or given up a major purchase (e.g., car or home) because of worry about their job at 42. One interesting result of the crackdown was that while 49% of people who rented condos currently under construction hesitated to buy big-ticket items, only 27% citizens persuaded by bank lending are waiting around before purchasing their own homes in housing markets, realtors and economists alike say nervous buyers are sitting it out. In housing markets, Realtors and economists report that nervous buyers are sitting on the sidelines. Redfin’s head economist Chen Zhao observes that “many workers are worried about job security… so from a housing perspective that wariness is keeping some would-be homebuyers on the sidelines”.
It’s not only housing. Conference Board data show a mixed pattern of planned spending: intentions to buy cars and even washers/dryers rose modestly (presumably as people hold onto goods longer), but plans to buy TVs, electronics and other big-ticket items have fallen. Vacation travel plans have slipped for two months in a row, and restaurant/dining out spending intentions are down. In effect, consumers are postponing non-essential purchases and focusing on necessities. Meanwhile, survey after survey shows rising pessimism about jobs: larger shares of people expect the unemployment rate to rise, and many feel it would be harder to find a new job if they lost one. This chronic job anxiety is a key reason consumers say they will spend less going forward.
Even prior good news is being reinterpreted: strong stock portfolios or 401(k)s have not quelled the worry that a recession is looming. In Michigan’s survey, the percentage of people expecting a recession in the next year has climbed back up (to levels seen in April) even though the economy is technically growing. In short, tight budgets and fear of losing work have prompted many Americans to cut back now, which in turn feeds the pessimism in the surveys.
The Political Backdrop and Partisan Splits
Partisan factors also color Americans’ economic sentiment. Research shows that people always feel in line with politics. This is why usually a supporter of one party in power feels more optimistic while others become increasingly negative. Nowadays, this means Republicans – the party of President Trump – generally give higher confidence reports than Democrats. However, by late summer 2025 supporters from both parties become more anxious.
The Conference Board noted in August that confidence fell for both Republicans and Democrats, even as independents held steady. In public commentary, President Trump himself has routinely blamed “high rates” on Federal Reserve policy, writing on social media that Fed Chair Powell was “Too Late!” to cut rates. Such rhetoric can intensify partisan views. For example, consumers who are worried about tariffs or government policy often cite them as key concerns. Michigan’s Survey of Consumers found that after the 2024 election, respondents’ write-in comments about tariffs and high prices spiked again in August.
In other words, economic confidence is not just economics – it’s political, too. Whether it’s disagreements over trade policy or debates over inflation vs. unemployment, Americans are filtering news through their political lenses. This means the current divide may not be symmetric: Democrats unhappy with the president’s policies might feel gloomier than Republicans even if the fundamentals are the same. That said, most agree the overarching trends have an objective basis: prices are higher and jobs are less secure today than just months ago, regardless of party label.
What This Means for the Economy and 2026 Elections
U.S. consumer sentiment tends to rise and fall with the economic cycle. If consumers are nervous, there may be further after-effects for both U.S. and the world economy. Real spending looks lower, retail sales are down: is it really likely that when businesses continue in such an anemic state of trading they should get all goosy over something like Tariff Revision Treaty Making With Lone Star Steel or even consider it? Well, the December retail sales figures were very disappointing. For many companies, January followed with similarly slow sales. By the time you read this article, there will be other data: probably equally disappointing results. Yet nobody knows how long this malaise will last–whether it is a weakened or lingering state of the American economy. If personal consumption falters [which includes housing), a widely presumed recession could indeed materialize; even if not, businesses and consumers may sense that there is no real need to build up inventory as they don’t foresee further growth in the near future. Many who make the call think we are just two more interest rate hikes before the next Bin laden storm hits the. Then the consumer’s will cinct down hard again, from hunkering down and refusing to hire to cutting back in all other areas of spending. The US Federal Reserve’s monetary policy is in a state of flux. As Federal Reserve officials have said, they plan to cut rates this year for the sake of economic growth; however, making sure that there is no resurgence in inflation remains one of their foremost priorities. In 1966, living costs are certain to rise without recession. This probably explains why the cost of living went up by three percentage points in 1965. Happy are those who have money, “laughed a Hsinhua News Agency correspondent. National economic conditions affect everybody, but prices pose particular problems for workers. As long as people wish to work, enterprises may not stop hiring workers; but if price stresses continue just now when business is slowing down and workers are not feeling pressured about an imminent layoff, then companies will have in mind 10 kinds of reason why they can’t afford to hire anybody new this year. Although the immediate future of spending and growth is unpredictable, what we do know is who will next be elected president. According to history, when voters go to the polls, economics are top of mind for them most times this is because in previous elections where a president has been standing for re-election he has done so on policies he believes helped to bail his party out of difficult situations. As political analysts point out, the party that holds the White House has lost as many seats in the U.S. Congress during its midterm elections. Is there any chance then that their administration will either retain confidence or see great improvement? Some voices on Wall Street warn that we are riding the cusp of an economic downturn: As Christopher Rupkey averred, “The economy is skating as close to recession as you can get,” with companies “hunkering down and refusing to hire anybody new till the outlook brightens.”
Future Expectations of Americans
Given the fraught market situation, if the US household is not alert the end result may well be a time of caution. It is likely that the factors shaking confidence — costs of essentials such as foodstuffs and gasoline, interest rates that are rising, but stagnant employment market they create–will not leave overnight. But there’s still a chance left. Over the next few months, consumers should continue to put priority on buying necessities and stop buying too many luxuries until economic signals improve. The good news is that at present inflation is only slightly higher than the 2% target set for it by Fed (and significantly less than each year from 2012 on), with preliminary data showing signs of easing supply-chain logjams. If price inflation is moderate and employment stabilizes, confidence might come back. But questions remain. The Fed’s actions, future trade policy and political unrest (such as fighting over the debt ceiling or tax changes) will still affect consumer morale. At least for the time being, experts are urging households to prepare for lean financial times: Obtain money in reserve wherever it can be got, don’t borrow more than one should and plan future income realistically. Some consultants also mention that these indicators of the state of general consumer confidence will be followed closely by corporate as well as government decision makers.
Slumping consumer mood is a warning sign that businesses may need to ramp up hiring and investment cautiously, and that economic growth could be slower until consumers start feeling more secure.
