American consumer confidence took a significant tumble in early September, reaching its lowest point in recent years. Rising gasoline prices and escalating trade tensions have combined to heighten public anxiety over the cost of living.

According to preliminary survey results released by the University of Michigan on Friday, the consumer sentiment index fell to 47.8 in September from 51.7 in August, missing every forecast in a Bloomberg poll of economists. Consumers' expectations for inflation over the next year jumped to 4.6% from 4%, while the longer-term outlook for 5 to 10 years also ticked up slightly to 3.4%.

There are clear triggers behind this decline in sentiment. Gasoline prices have climbed to their highest levels on record for the month of September. Ongoing US-Iran tensions continue to push energy costs higher, directly eroding the purchasing power of American households.

The survey captured responses collected between August 25 and September 7, a period marked by accelerating gasoline prices and rising trade tensions.

Also on Friday, data showed the core Consumer Price Index (CPI) rose 2.4% year-over-year in August, marking the lowest reading in five and a half years. On a monthly basis, core inflation increased 0.3%, beating expectations and posting the largest gain in four months. Traders now price in roughly a 90% probability that the Federal Reserve will raise interest rates next week.

The economic outlook has dropped to its lowest level since 2022, with a majority of consumers now anticipating a Fed rate hike within the next year

The expectations index, which measures the outlook for the future, fell particularly hard in this survey, plunging from 51.5 to 45.8. In contrast, the current conditions index, reflecting present circumstances, held relatively steady, dipping only slightly from 51.9 to 50.9.

Consumers' assessments of the economy's trajectory over the coming year are now at their weakest point since July 2022. Evaluations of both current and future personal finances have also deteriorated across the board.

Worth noting is that, for the first time since 2023, a majority of consumers expect the Federal Reserve to raise interest rates within the next year. This shift points to deep-seated concerns about a resurgence of inflation.

Confidence falls across party lines, with Republican satisfaction at its lowest since Trump's return

This decline in confidence cuts across party affiliations. The survey shows that consumer sentiment fell among both parties. Notably, only 35% of Republican respondents believe the administration is handling the economy well, marking the lowest reading since Trump returned to the White House last year.

Joanne Hsu, director of the University of Michigan's Surveys of Consumers, commented in a statement:

"Assessments of government economic policy have dropped by about 10% this month and remain well below levels seen in February 2026, before the conflict with Iran. It's particularly striking that even Republicans, who typically back the current administration's economic policies, show a marked decrease in satisfaction."