U.S. consumer sentiment declined again from last month and by more than expected, with September's preliminary reading coming in at 55.4 vs. 58.2 in August and 61.7 in July. This compares to the consensus of 58.0 in the Econoday survey of forecasters.

The pessimism is no longer due to just inflation, with growing concerns about business conditions and employment now in the mix.

"Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets, and inflation, the report said. Likewise, consumers perceive risks to their pocketbooks as well; current and expected personal finances both eased about 8% this month.

In addition, [t]rade policy remains highly salient to consumers, with about 60% of consumers providing unprompted comments about tariffs during interviews, little changed from last month."

The flash year-ahead inflation expectations remained at 4.8 percent in September, unchanged from August.

Long-run inflation expectations in September also rose to 3.9 percent from 3.5 percent last month, the second consecutive monthly increase.

The first report for September is expected to show sentiment failing to recover at 58.0 after falling to 58.2 in August from 61.7 in July. Consumers are clearly still in a bad mood as job worries are rising and inflation fears continue.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.