U.S. consumer sentiment fell about 8% in August, snapping two consecutive months of improvement as worries about inflation linked to the Middle East conflict weighed on households. The University of Michigan's Index of Consumer Sentiment came in at 51.0 for August, down from 55.2 in July, a month-over-month decline of 7.6%. Economists surveyed by had forecast a reading of 54.5.
A Bloomberg survey of economists had projected 55. The decline was broad-based. While views of personal finances saw only minor changes, expected business conditions sank 11% for the short run and 17% for the long run, according to the survey.
The Index of Consumer Expectations fell to 50.6 from 55.4, and the Current Economic Conditions Index dropped to 51.8 from 54.8. Joanne Hsu, director of the University of Michigan Surveys of Consumers, said sentiment fell across the political spectrum, with Republicans recording the steepest month-to-month drop. "Sentiment among Republicans is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election," Hsu said in a statement.
Notably large declines were also recorded among older consumers, lower-income consumers, and those without a college degree — groups Hsu described as particularly vulnerable to any erosion of purchasing power from inflation. Year-ahead inflation expectations rose to 4.3% from 4.2% in July, topping the 3.4% reading recorded in February, just before the Iran conflict erupted, and coming in above every 2024 reading as well. Consumers' five-to-ten-year inflation outlook remained anchored at 3.3%, unchanged for the third consecutive month.
Only 8% of consumers expect their income growth to outpace inflation in the year ahead, down from 18% in December 2024. The August data extends a turbulent stretch for consumer confidence that began when conflict in the Middle East disrupted oil markets and drove up gasoline prices. Sentiment rebounded in June from a record low set in May, when the index fell to 44.8 amid surging pump prices and deepening concern that inflation would spread beyond fuel costs.
The June recovery was driven in part by falling gasoline prices, though consumers remained worried about the cost of living. A July gain extended that rebound before August's reversal. The survey drew on responses collected between July 28 and Aug. 10, a period when the national average gasoline price remained above $4 a gallon, according to Bloomberg.
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