University of Michigan consumer sentiment fell about 8% in August, ending a
two-month improvement, survey director Joanne Hsu said. Views of personal
finances deteriorated only slightly, but business-condition expectations
plunged, with short-run expectations down 11% and long-run expectations down
17%. Declines were broad across political groups; Republicans posted the largest
monthly drop and are now 19% below their level before the Iran conflict, at
their weakest since the 2024 election. Weakness was concentrated among older,
lower-income and non-college consumers, groups most exposed to inflation-driven
purchasing-power losses. Only 8% of consumers expect their incomes to outpace
inflation over the next year, down from 18% in December 2024. One-year inflation
expectations rose to 4.3% in August from 4.2% in July, above the pre-conflict
February reading of 3.4% and above all 2024 readings; long-run inflation
expectations held at 3.3% for a third month, slightly above the 2024 range of
2.8–3.2%.
