Consumer sentiment falls in August on inflation, buying power concerns
Consumers fear their purchasing power is eroding among high prices.
Consumer sentiment dropped 6.3% month over month in August amid continued worries that inflation will remain elevated for the foreseeable future, according to the University of Michigan Surveys of Consumers. The August reading is down 11.2% year over year.
The Index of Consumer Sentiment fell to 51.7 in August, down from 55.2 in July. The Current Conditions Index fell to 51.9, down from 54.8. The Index of Consumer Expectations fell to 51.5, down from 55.4.
"With ongoing policy uncertainty including the Iran conflict, consumers anticipate further increases in gasoline prices both in the short and long run," said UM economist Joanne Hsu, director of the surveys. "In addition to the pocketbook issues that have been central to consumers' views of the economy, they are increasingly worried that prospects elsewhere in the economy could be weakening."
A growing 53% of consumers spontaneously mentioned that high prices are weighing down current personal finances, up from 50% last month and 45% in January 2026.
"Looking ahead to the future, consumers expect their purchasing power to erode," Hsu said. "Expectations for consumers' own inflation-adjusted incomes have broadly weakened over the past year and a half, with a growing majority expecting inflation to outstrip income gains. Only 10% of consumers expect their purchasing power to increase in the year ahead.”
Inflation
Consumers are worried about the potential impact of inflation on the economy more generally. Recent months of data show that consumers increasingly believe inflation poses greater risks to the economy than unemployment, according to Hsu.
At the beginning of the year, when asked which factor will present more serious hardship for people, 23% of consumers named inflation and 14% reported unemployment (the remaining indicated both equally). In August, however, the share naming inflation climbed to 36%, while only 6% selected unemployment.
The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by web.