US Consumer Sentiment Slips in August on Inflation Fears

American consumer confidence took a hit in early August, with a closely watched survey showing a decline in sentiment as households grew more anxious about the rising cost of living. The drop comes amid heightened tensions in the Middle East, which have stoked concerns about energy prices and broader inflationary pressures.

The University of Michigan's Consumer Sentiment Index fell to 51.0 this month, down from 55.2 in July. That reverses two consecutive months of improvement and came in below the 54.5 reading that economists had anticipated.

The weakening in sentiment was broad-based, cutting across the political spectrum, though the sharpest month-over-month decline was recorded among Republican respondents. Joanne Hsu, who directs the Surveys of Consumers, noted that Republican sentiment is now 19% below levels seen just before the Iran conflict and at its lowest point since the 2024 election.

While the early-August pullback was widespread across demographic groups, Hsu highlighted particularly large reductions among older consumers, lower-income households, and those without a college degree.

Inflation expectations also moved higher. Consumers now expect prices to rise at a 4.3% annual rate over the next year, up from 4.2% in July. Longer-term expectations, however, held steady at 3.3% for the five-year horizon.