Consumer outlook plunges in September as inflation outlook worsens

Consumer sentiment collapsed to 47.8 in September, falling 7.5% from August and 13.2% below year-ago levels, according to the University of Michigan's monthly survey released Friday. The reading marks the second-lowest level on record for the closely watched gauge, driven by mounting inflation concerns among households.

The sharp monthly drop signals deteriorating consumer expectations for both economic conditions and their own finances. Inflation outlook among survey respondents worsened during the month, pressuring the headline index lower despite recent moderation in actual price data.

The University of Michigan survey has historically correlated with near-term shifts in consumer spending, which accounts for roughly 70% of U.S. economic activity. The September plunge intensifies concerns that high prices are finally eroding household willingness to spend, even as the labor market remains relatively robust.

Friday's release adds to a growing list of mixed economic signals complicating the Federal Reserve's policy path. Weak sentiment readings typically precede slower retail activity and reduced corporate earnings for consumer-facing companies.