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 vs. economists’ estimate of 54.8, while the expectations index was 50.6 vs. the estimated 55.2. 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 the survey’s 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 in 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 5-10 year price expectations remained flat month over month at 3.3%. Economists had been looking for one-year inflation expectations of 4.2% and 5-10 year expectations of 3.3%.