Inflation worries drive first decline in months
Consumer sentiment weakened in August for the first time in four months as inflation concerns resurfaced. The University of Michigan’s latest survey showed year-ahead inflation expectations climbing to 4.9% from 4.5% in July, with pessimism spread across all demographics and political affiliations. Overall sentiment fell 5% from the previous month.
Rising prices and job market concerns
While annual inflation has stayed at 3% or lower this year, core inflation rose 0.3% between June and July, the biggest increase in six months. Stronger-than-expected wholesale inflation data suggested more price pressure ahead. The survey also reflected growing fears about employment, following three straight months of weak job growth. July saw 73,000 new jobs, below the 104,000 forecast, while May and June figures were revised down to just 33,000 combined.
Recession fears and spending trends
Survey director Joanne Hsu noted that consumers are no longer expecting the worst-case scenario feared in April when reciprocal tariffs were announced, though concerns remain after new tariffs took effect last week. About 60% of respondents expect unemployment to rise in the year ahead, a level last seen during the Great Recession. Despite the cautious outlook, retail sales rose 0.5% in July from June, signaling continued consumer spending.
