US consumer sentiment deteriorates in August

U.S. consumer sentiment plummeted in early August due to concerns over rising living costs stemming from the Middle East conflict, according to a survey released on Friday by the University of Michigan. The Consumer Sentiment Index fell to 51.0, down from 55.2 in July, marking the end of two consecutive months of improvement. Economists polled by Reuters had predicted the index would stand at 54.5.

The decline in sentiment was felt across the political spectrum, with a significant month-to-month drop among Republicans. Sentiment among this group is now 19% lower than readings just prior to the Iran conflict and the lowest since the 2024 election, reported Joanne Hsu, the Surveys of Consumers' director.

While the early-month weakening in sentiment affected various demographic groups, notably large reductions were observed among older consumers, those with lower incomes, and individuals without a college degree. The survey's measure of consumer expectations for inflation over the next year rose to 4.3% from 4.2% in July. However, expectations for inflation over the next five years remained unchanged at 3.3%.