US Consumer Sentiment Hits Four-Month Low as Inflation Expectations Rise

U.S. consumer sentiment slipped to a four-month low in September, with the University of Michigan's final index at 48.1, down from 51.7 in August . The final print was not a downside surprise, though: it improved from the preliminary September reading of 47.8 and landed slightly above consensus, which one wire listed at 47.5 .

The more worrying signal sits in prices. One-year inflation expectations rose to 4.6% from 4.0% in August, unchanged from the preliminary reading, while five-to-ten-year expectations edged up to 3.4% after holding at 3.3% for three months, according to Reuters . Surveys of Consumers Director Joanne Hsu said interviews reveal broad agreement across the political spectrum that the economic outlook has weakened since the start of the year, with Republican sentiment down 20% since January and Democratic sentiment down 13%, per Reuters.

Under the headline, the Current Conditions index held at 50.9, unchanged from the preliminary reading, and the Expectations index rose to 46.3 from a preliminary 45.8 . That combination, a weak but not deteriorating near-term picture alongside firmer inflation expectations, is the mix that complicates the Federal Reserve's path: softer confidence argues for patience while rising expectations argue against easing .

What to watch: whether consumer-facing companies report the softer mood showing up in discretionary spending, and whether Fed officials cite the rise in long-run inflation expectations in upcoming remarks. The next preliminary Michigan reading, for October, will show whether the upward revision to the final September number marks a floor.