Consumer Sentiment Plummets for Lower-Income Households

Consumer sentiment in the U.S. has taken another sharp downturn, as September’s preliminary data from the University of Michigan signals mounting anxieties over tariffs, inflation and the labor market.

This latest drop in optimism—now at its lowest point since May—highlights a growing sense of caution among American households, especially among lower- and middle-income groups, who are increasingly sensitive to changing business conditions and economic policy.

The data released Wednesday (Sept. 12) shows that consumer sentiment is continuing to drop toward the end of Q3, this time at a pace of 5% month-over-month and accumulating a 25% drop in the first nine months of the year.

If reinforced by final readings from the University, this second consecutive decrease would mostly offset the mild recovery registered in June and July. Consumer sentiment fell in six out of the nine first months of 2025.

Within the index, it was forward-looking assessments, as measured by the “expected” index, which fell the most. The 7% dip in September (provisional) implies the subindex stands 29% below the mark of December. The “current” index, measuring present assessment of consumer’s situations, contracted mildly (-0.8%), accumulating a decrease of 19% over the nine-month period.

Sentiment Sours Among Lower-Earning Households

Across income groups, the University reports a disproportionate drop in sentiment among lower- and middle-income consumers.

Business conditions, labor markets and inflation remain as the more prominent worries in consumers’ minds. The report also highlights “about 60% of consumers providing unprompted comments about tariffs during interviews.” Recall that as reported on Thursday (Sept. 11) by PYMNTS, the Consumer Price Index for All Urban Consumers rose 0.4% in August, seasonally adjusted, and rose 2.9% over the last 12 months, quickening its pace, with noticeable increases in the key category of food (and groceries in particular).

Year-ahead inflation expectations as measured by the survey held steady at 4.8%, unchanged from August. But for over a more distant horizons, long-run inflation expectations moved up for the second straight month to 3.9% in September.

In comments provided alongside the Friday release, Survey Director Joanne Hsu said: “Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets and inflation. Likewise, consumers perceive risks to their pocketbooks as well; current and expected personal finances both eased about 8% this month.”

This elevated outlook could further dampen spending, as consumers may anticipate higher prices and adjust behaviors accordingly, or even bring forward some purchases in anticipation of rising costs, contributing to inflation’s persistence. PYMNTS reporting on Friday recounted that holiday shopping has already started to take flight in anticipation of those price increases. Given the fact that, as noted above, 60% of respondents in the Friday sentiment survey brought up tariffs unprompted, the data shows just how prominent these concerns have become in everyday financial thinking.