Less buying power, elevated inflation push down consumer views

Consumer sentiment declined by 6% in August 2026, falling 11% below the level a year earlier, as indicated by the University of Michigan's Surveys of Consumers. The decline was observed across all political groups and was particularly significant among Republicans. Older consumers, lower- and middle-income families, and those without a college degree experienced the most pronounced drops in sentiment.

This downward trend in consumer confidence is attributed to the persistent issue of inflation, which remains a major concern for the foreseeable future. The ongoing uncertainty surrounding the Iran conflict has further fueled expectations of higher gasoline prices in both the near and distant future. Alongside the financial strain caused by rising prices, consumers are increasingly worried about potential weakening across other sectors of the economy.

Business conditions for the next year and five years both saw declines, with the latter experiencing a 13% drop. Furthermore, the expectation of year-ahead business conditions shrank by 10%. Amid these deteriorating economic outlooks, a growing majority of consumers, 53%, reported that high prices are negatively impacting their personal finances.

Looking further ahead, only 10% anticipate an increase in their purchasing power, while an overwhelming majority expect inflation to outpace income gains. Notably, the share of consumers expecting their purchasing power to rise has dropped from 18% in January 2026 to just 10% currently. The survey revealed that only 10% of consumers expect their purchasing power to grow in the upcoming year.