Consumer sentiment slipped 5% in August, marking the first decline in four months.
Inflation worries drove a sharp drop in buying conditions for durable goods, falling 14% to a one-year low.
Inflation expectations rose across the board, with year-ahead projections climbing to 4.9%.
U.S. consumer sentiment declined in August for the first time since spring, reflecting renewed concerns about inflation and household finances, according to a preliminary University of Michigan Surveys of Consumers report. The full survey will be released at the end of the month.
The sentiment index fell about 5% from July, breaking a three-month streak of improvement. Joanne Hsu, director of the Surveys of Consumers, said the downturn was fueled largely by growing worries about rising prices. Consumers’ outlook on buying conditions for durable goods plunged 14%, hitting its lowest level in a year, as households felt the pinch of elevated costs.
Finances under pressure
The survey found that current personal finances weakened modestly, with many respondents citing diminished purchasing power. At the same time, expected personal finances ticked up slightly, supported by a modest firming in income expectations—though overall sentiment about future earnings remained muted.
Hsu noted that consumers are no longer anticipating the kind of worst-case economic scenarios that loomed in April, when reciprocal tariffs briefly threatened to intensify inflationary pressures. Still, worries about both inflation and unemployment remain at the forefront of household concerns.
Increased worries about inflation
Inflation expectations shifted upward in August after easing for several months. The survey showed year-ahead inflation expectations rose to 4.9%, up from 4.5% in July. The increase was broad-based, cutting across demographics and political affiliations. Long-run inflation expectations also edged higher, climbing to 3.9% from 3.4% last month.
While both measures remain below the peaks recorded in April and May 2025, the uptick points to ongoing uncertainty about the economy’s trajectory. August marked the end of a two-month decline in short-run inflation expectations and a three-month decline in long-run forecasts.
“Consumers continue to expect both inflation and unemployment to deteriorate in the future,” Hsu said.
The July Consumer Price Index remained flat compared to June, with few signs of inflation. However, the July Producer Price Index rose 0.9% from June, suggesting building inflation at the wholesale level.