Consumer sentiment dips, especially among Republicans

The University of Michigan's consumer sentiment index revealed a notable decline in August 2026, with overall sentiment dropping 8% from July's 55.2 to 51, according to preliminary data released this month. This marks the steepest monthly decline in sentiment, particularly among Republicans, whose outlook plunged 19% below pre-Iran war levels and hit the lowest point since the 2024 election.

The survey, conducted by Joanne Hsu, director of the Michigan survey, noted that the decline was widespread across various demographic groups. Notably, older consumers, lower-income consumers, and those without a college degree experienced significant reductions in their outlook. These groups are particularly vulnerable to inflation's impact on purchasing power, according to Hsu.

When asked about their income outlook, only 8% of consumers expect their earnings to outpace inflation in the coming year, down from 18% in December 2024. This expectation underscores the belief that persistently high prices will continue to burden households. Despite inflation expectations remaining stable, with a 4.3% annual rate and a 3.3% five-year projection, the sentiment index suggests growing concerns among American consumers about their economic situation.