UMich Sentiment ‘Expectations’ Plunge Near Record Lows As Republicans Lose Faith, Inflation Fears Rebound

After July’s rebound to pre-war levels, a re-escalation in the MidEast (and soaring fuel costs) sent confidence back towards YTD lows. Preliminary September data was expected to show UMich headline sentiment sliding further.

‘Slide’ is not exactly how we would describe preliminary September confidence data’s collapse (headline from 51.7 to 47.8 vs 51.0 exp). The current conditions gauge fell to 50.9 from 51.9 in the previous month, while the expectations index plunged to 45.8 from 51.5 – just off record lows.

Democrats and Republicans alike posted sizable declines, while independents were little changed from August.

“Opinions of the government’s economic policy worsened about 10% this month and remain substantially below February 2026, just prior to the Iran conflict,’’ Joanne Hsu, director of the survey, said in a statement.

“Notably, even Republicans, who generally supported economic policy under the current administration, have exhibited a marked decline in favorability.’’

Year-ahead inflation expectations jumped from 4.0% last month to 4.6% this month, the highest reading since June.

BUT… umm… How is this possible: Democrat inflation expectations dropped, Republican and Independent inflation expectations unchanged… yet overall inflation expectations jumped the most since May 2026!?

With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come.

Five-year expected business conditions remained stable at readings well below their historical average, suggesting that consumers believe that emerging risks this month may not have further worsened the long-run outlook. 

Finally, as we noted earlier, real wage growth has now been negative for five straight months…

Not exactly confidence inspiring.