After reporting a substantial deterioration in U.S. consumer sentiment in the previous month, the University of Michigan released preliminary data on Friday showing sentiment has rebounded by more than anticipated in the month of September.

The report said the consumer sentiment index rose to 92.0 in September after plunging to a three-year low of 89.8 in August. Economists had expected the index to inch up to 90.9.

The bigger than expected rebound by the headline index came as the index of current economic conditions crept up to 106.9 in September from 105.3 in August and the index of consumer expectations climbed to 82.4 from 79.9.

"While the uptick was across both current and expected economic conditions, the early September rebound was not widespread across age or income subgroups," said Surveys of Consumers chief economist Richard Curtin.

The improvement in consumer sentiment was consolidated among consumers under age 45 and households with incomes in the top third, although Curtin noted these two groups account for about half of all spending.

Curtin noted that the data indicates consumers widely expect the Federal Reserve to cut interest next week, with net declines in rates more frequently expected than any time since the depths of the Great Recession.

"These expectations are likely to diminish the impact on spending from a quarter-point rate cut, but if rates remain unchanged, it may increase negative reactions by consumers," Curtin said.

He added, "Concerns about the impact of tariffs on the domestic also rose in early September, with 38% of all consumers making spontaneous references to the negative impact of tariffs, the highest percentage since March 2018."

With regard to inflation, the report said one-year inflation expectations ticked up to 2.8 percent in September from 2.7 percent in August, while five-year inflation expectations fell to 2.3 percent from 2.6 percent.

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