Consumer sentiment falls amid increasing inflation concerns

Consumer sentiment fell in August for the first time in four months, dropping about 5 percent as inflation concerns increased, according to the latest University of Michigan Surveys of Consumers..The index tracking consumer sentiment fell 5 percent this month to 58.6 from 61.7 in July, and was 13.7 percent from 67.9 in August 2024. The decline was partially caused by a 14 percent fall in buying conditions for durable goods — the lowest reading in a year — as consumers cited high prices. Inflation increased 0.2 percent on a seasonally adjusted basis for the month of July and 2.7 percent over the past 12 months, according to the Bureau of Labor Statistics. The current economic conditions index fell 10.4 percent to 60.9 from 68.0 in July, nearly identical to its year-ago reading of 61.3. The index covering consumer expectations fell nearly 1 percent to 57.2, 20.7 percent under its August 2024 reading of 72.1. Year-ahead inflation projections increased to 4.9 percent in August from 4.5 percent the previous month, with rises seen across demographic groups and political affiliations. Long-run inflation expectations increased to 3.9 percent from 3.4 percent in July. Short- and long-term inflation readings remain below the peaks this spring.Assessments of personal finances also slipped modestly, reflecting growing concerns about purchasing power. “Consumers are no longer bracing for the worst-case scenario for the economy feared in April when reciprocal tariffs were announced and then paused,” said Joanne Hsu, director of the Surveys of Consumers. “However, consumers continue to expect both inflation and unemployment to deteriorate in the future.”The Consumer Confidence Board Consumer Confidence Index increased 2 points last month to 97.2 from 95.2 in June. The index tracking consumers’ assessments of current business and labor market conditions fell 1.5 points to 131.5, while the index based on consumers’ short-term outlook for labor, business and income conditions increased 4.5 points to 74.4. Despite the increase, the short-term outlook index still indicates recession expectations in the next six months. “Consumer confidence has stabilized since May, rebounding from April’s plunge, but remains below last year’s heady levels,” said Stephanie Guichard, senior economist in global indicators at The Conference Board.