US consumers sour on economy as inflation concerns remain in focus, UMich survey says

US consumers sour on economy as inflation concerns remain in focus, UMich survey says

Jake Conley · Breaking Business News Reporter

Fri, August 14, 2026 at 6:35 PM GMT+3 3 min read

US consumers grew more gloomy about the economy in August as sentiment declined amid the war, higher bond yields, and geopolitical uncertainty, according to a preliminary consumer sentiment reading from the University of Michigan.

UMich's Index of Consumer Sentiment fell to 51 from July's 55.2 reading, coming in markedly below economists' expectations of 55 and ending two consecutive months of improvement in the metric.

Indexes tracking current conditions and consumer expectations also underperformed estimates. The current conditions index printed at 51.8 versus economists' estimate of 54.8, while the expectations index was 50.6 versus the estimated 55.2.

Read more: What is consumer confidence, and why does it matter?

"Although the early-month weakening in sentiment was pervasive across various demographic groups, notably large reductions were seen among older consumers, lower-income consumers, and those without a college degree," said survey director Joanne Hsu. "These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation.

In line with the overall vibe shift, consumers' expectations of inflation over the next year also rose — a bearish sign for markets dealing with five years of above-target inflation. Year-ahead inflation expectations rose to 4.3% from 4.2% in July, while 5-to-10-year price expectations remained flat month over month at 3.3%.

Economists had been looking for one-year inflation expectations of 4.2% and 5-to-10-year expectations of 3.3%. Only 8% of consumers expect income growth to outpace inflation over the next year, per the survey.

The readings come after consumer and wholesale inflation data from the Bureau of Labor Statistics' monthly Consumer Price Index (CPI) and Producer Price Index (PPI) readings showed mild improvement in price appreciation.

The Consumer Price Index rose 3.4% in July from a year ago, down slightly from June's 3.5% annual increase, even as prices rose 0.1% on a monthly basis. On the wholesale front, prices eased in July from June's levels but came in above expectations as the Producer Price Index minus food, energy, and trade services advanced 4.7% in July, compared with expectations of 4.6% and June's 5.1% reading.

That inflation data was enough for traders to back off bets that the Federal Reserve will raise rates at its September meeting. Prior to those releases, bets had been largely split 50-50 after a far weaker-than-expected July jobs report. Now, the market is assigning roughly 70% odds that the Fed will stay on hold.

The market is still pricing in at least one hike by the Fed's December meeting.

In another bearish sign, retail sales data from the Department of Commerce, also released on Friday, showed sales fell 0.6% month over month, a disappointment compared with expectations that sales would grow 0.1%, as concerns linger about the true strength of the consumer.

Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.

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