American consumer sentiment declined in August for the first time in three months, as a worsening economic outlook weighed on household mood. Expectations for inflation over the coming year receded but remain historically elevated, underscoring how persistently high prices continue to shape public perceptions of the economy.
Data released Friday by the University of Michigan showed its consumer sentiment index slipping to 51.7 for August. The final reading came in slightly above the preliminary estimate released earlier this month and also beat the median forecast from economists polled by media outlets.
On the inflation front, consumers anticipate prices will rise at an annual rate of 4% over the next year, the lowest level since March. Even so, that figure remains high when measured against historical benchmarks. Joanne Hsu, who directs the University of Michigan's Surveys of Consumers, noted in a statement that households remain worried inflation will stay elevated for the foreseeable future. She added that, alongside longstanding concerns over prices and personal finances, there is a growing sense that other parts of the U.S. economy could also be losing momentum.
The survey showed that consumer views on both the one-year and five-year economic outlook deteriorated in August. Indices tracking current economic conditions and consumer expectations also fell compared with July, with sentiment among Republican respondents dropping to its lowest level since November 2024.
The decline in consumer confidence signals that hefty living costs are still straining American households amid ongoing conflict in the Middle East. National average gasoline prices held above $4 per gallon throughout August, while broader inflationary pressures continued to erode real household incomes. Hsu indicated that consumers now expect pump prices to climb further in the months ahead.
Looking at longer-term expectations, consumers project prices will rise at an average annual rate of 3.3% over the next five to ten years, suggesting that despite some cooling in near-term inflation expectations, public unease about sustained high inflation has not dissipated.
This month's University of Michigan survey gathered responses from July 28 through August 24. Overall, the August data paints a mixed picture: short-term inflation expectations have improved modestly, yet worries over economic growth, household financial conditions, and the longer-run outlook are intensifying. With elevated fuel costs and persistent price pressures, the renewed softening in consumer sentiment adds fresh uncertainty to the outlook for U.S. spending and economic expansion.
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