Consumer sentiment was essentially unchanged in September, just 0.4 index points above August, according to the University of Michigan Surveys of Consumers.

The one-year economic outlook continued lifting from the extremely low readings earlier in the summer, but these gains were largely offset by modest declines in the long-run outlook, said U-M economist Joanne Hsu, director of the surveys.

Personal finance components of the index and buying conditions for durables remained at similar, relatively low levels from last month. Following the notable improvement in August, sentiment remained low by historic standards as consumers continued to voice concerns about inflation.

“Consumers welcomed the slowdown in inflation last month, but they show signs of uncertainty over the trajectory of the economy,” Hsu said. “Developments overseas generate downside risks. The continued war in Ukraine, the prospect of higher energy costs in Europe and climate disasters all have the potential to exacerbate inflation in the U.S., and consumers will quickly notice any pass-through to rising prices.”

Inflation slows but continues to weigh on consumers

The tentative slowdown in inflation last month has not, as of yet, translated to sustained improvements in how consumers feel about their financial situations, Hsu said. About 42% of consumers cited high prices eroding their living standards, down from a peak of 49% in July but more than double the 18% reading from a year ago.

Consumers expect this erosion to continue; while most consumers expect their incomes to rise over the next year, the median expected increase fell from 2.3% last month to 1.7% this month. At the same time, consumers expect continued strength in labor markets, with little change in expectations for the unemployment rate.

Consumers see mixed signals on inflation

With continued declines in energy prices, consumers’ outlook for inflation has continued to improve. It is unclear if these improvements will persist, as consumers continued to exhibit substantial uncertainty over the future trajectory of prices, likely due to conflicting signals in the economy, Hsu said. While gas prices fell over the last several months, food prices and core inflation have not substantively improved.

At the same time, while buying conditions for durables remained near its all-time low from June, concerns about the high prices of durable goods have started to ease. Still, 57% of consumers blamed high prices for worsening buying conditions for vehicles.

As conflicting information about prices continues to fuel consumers’ uncertainty, consumer attitudes toward the economy are likely to remain relatively unstable in the months ahead, Hsu said.

Consumer Sentiment Index

The Consumer Sentiment Index rose to 58.6 in the September 2022 survey, up from 58.2 in August and below last September’s 72.8. The Current Index rose to 59.7, up from 58.6 in August and below last September’s 80.1. The Expectations Index rose to 58, unchanged from August and below last September’s 68.1.

About the surveys

The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current and Expectations Index, the minimum is 6 points.

Surveys of Consumers
U-M Institute for Social Research