Consumer Says: U.S. consumer resilience is poised to be tested this fall

Temperature check on the U.S. economy

In each edition of Consumer Says, our economists give an updated rating for current economic conditions using temperature as a metaphorical metric. Our “perfect temperature”--signifying an economy that is strong but not overheating–is 70 degrees. 

🌡️Current temperature: 64 ℉

Our rating of a 64-degree economic “temperature” still holds, but with a risk of near-term cooling. Consumer sentiment has been shaky over the past week among high-income adults, who disproportionately support aggregate spending growth. While Morning Consult’s unemployment index has not worryingly increased, jobs data has been disappointing amid persistently slow hiring. Furthermore, consumers appear to be noticing a pick-up in inflation for several goods and services as tariff impacts may be belatedly starting to bite.

Consumer says

🧺 Inflation is gradually reheating: The consensus estimate of the Consumer Price Index calls for a another increase in the annual inflation rate to be announced later this week by the Bureau of Labor Statistics; the rate of annual overall consumer price growth is expected to have risen from 2.7% to 2.9% in August. This would mark the fourth consecutive month of the measure moving in the wrong direction, away from the Federal Reserve’s target of 2.0%.

• 📣Consumer Says: Some of the improvement in household finances and resilient demand over the past year can be attributed to inflation relief, relative to peak levels a few years ago and perhaps also relative to worst-case-scenario concerns associated with tariff policies. The Price Surprise index helps capture consumers’ experience with prices, and the index remains well below its highs of the past few years. However, it has recently been climbing, suggesting that consumers are increasingly noticing price increases. With inflation the dominant driver of factors like sentiment, price sensitivity, and trading down that played a powerful role in purchasing decisions over the past few years, further increases in Price Surprise may be an early indicator of trouble for the U.S. consumer.

📊Topline sentiment wiggling but not collapsing: The latest University of Michigan release on consumer sentiment showed a slightly lower reading for August than for June or July, with the current conditions component beating expectations and the future expectations component coming in lower than anticipated. Overall, sentiment held on to its recovery after dipping in early 2025 at the height of tariff concern.

• 📣Consumer Says: Morning Consult’s daily ICS has generally shown a more positive trend than Michigan this year, though following a similar path of dips and recoveries. In the latest week, the overall index moved little, but high-income adults ($100k+ annual household income) had a sizable drop in perceptions of the economy. It is yet to be seen if this is more a “blip or trend”; sentiment for this group has already partially recovered, but the volatility associated with this incident is a break from the recent trend of more languid movements.

💼Disappointing jobs report stokes labor market worries: The latest jobs report, released by the BLS last week, reinforced percolating concerns about the labor market. Nonfarm payrolls added only 22 thousand jobs last month, and unemployment ticked slightly higher to 4.3%. However, this uptick in joblessness was driven in part by a modest, but still welcome, increase in labor force participation.

• 📣Consumer Says: Morning Consult’s Unemployment index suggests a slightly more stable situation. From early August through the first week of September, the index has trended slightly lower. It should be noted that this data is not seasonally adjusted, and the BLS typically applies an upward seasonal adjustment in September, so recent progress may be driven in part by seasonal trends.