Consumer Sentiment Keeps Falling In September. It Reached The Second Lowest Level On Record.

Consumer sentiment continued dropping sharply in September, falling 7.5% month-over-month as oil prices keep climbing and inflation fears take hold.

The survey's director, Joanne Hsu, said "Democrats and Republicans alike posted sizable declines, while independents were little changed from August."

She went on to detail that year-ahead expectations for "both personal finances and business conditions plunged" as they anticipate "greater pressures on their pocketbooks to come" as a result of a "resurgence in fuel prices and trade tensions."

"Overall, sentiment is now 16% below February, prior to the start of the Iran conflict, and 13% lower than a year ago," Hsu added.

Year-ahead inflation expectations also climbed, going from 4% in August to 4.6% this month, the highest level since June. "The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings. Long-run inflation expectations ticked up to 3.4%, ending three consecutive months at 3.3%. These expectations remain higher than their 2024 range of 2.8% to 3.2%," Hsu said.

Another recent survey showed that almost a third of Americans expect their financial situation to get worse next year. Conducted by the New York Federal Reserve, the latest instance of the Survey of Consumer Expectations showed that respondents who expect their finance to get much or somewhat worse in the next year climbed 2.3 percentage points, clocking in at 32.6% compared to 30.3% last month.

Those claiming their financial situation was much or somewhat worse than a year ago climbed to 38.6%, compared to 37.6% in July.

Looking at inflation, median expectations were unchanged for the one-year- and five-year-ahead horizons, standing at 3.6% and 3%, respectively. For the three-year-horizon, the figure decreased by 0.1 percentage point, standing at 3.2%.

Odds of a rate hike by the Federal Reserve jumped on Friday after core inflation rose more than expected last month.

Chances are all but certain now, with the CME Group's FedWatch tool showing they now stand at 91.6% compared to Thursday's 72.4%.

Core inflation climbed more than expected in August, rising 0.3%. The figure was 0.1 percentage points more elevated than forecasts. The annual rate clocked in at 2.4%, as the Dow Jones consensus expected.

The Bureau of Labor Statistics showed that the headline figure climbed 0.4% last month, in line with expectations. The year-on-year figure stood at 3.4%, also in line with expectations.

"Indexes that increased over the month include communication, lodging away from home, airline fares, education, and used cars and trucks. Conversely, the index for medical care and the index for motor vehicle insurance were among the major indexes that decreased in August," BLS added.

The report is the latest the Fed will see before announcing its policy decision next week.