US Consumer Sentiment Falls to 4-Month Low

The University of Michigan’s consumer sentiment index was revised higher to 51.7 in August 2026, from a preliminary reading of 51.0. Despite the upward revision, sentiment fell about 6% from July and remained roughly 11% below its year-ago level, reflecting persistent concerns that inflation will remain elevated for the foreseeable future. Sentiment declined across all political groups, particularly among Republicans, while older, lower- and middle-income consumers and those without stock holdings saw sharper deterioration. Ongoing policy uncertainty, including the Iran conflict, has also fueled expectations of further gasoline price increases. Consumers are increasingly concerned about weakening economic conditions, with one-year business expectations falling 10% and the five-year outlook dropping 13%. Meanwhile, one-year inflation expectations eased to 4.0% from 4.2%, while long-run expectations held steady at 3.3% for a third consecutive month.

The University of Michigan’s consumer sentiment index fell to 51 in early August 2026, down from 55.2 in July and below market expectations of 54.5, ending two consecutive months of improvement. Both major components weakened, with the current conditions index declining to 51.8 and the expectations measure falling to 50.6. The deterioration was broad-based across political and demographic groups, with particularly sharp declines among older, lower-income and less-educated consumers, who are more exposed to rising prices. Expectations for business conditions also worsened significantly, falling 11% over the next year and 17% over the longer term. Inflation concerns increased slightly, with year-ahead expectations rising to 4.3% from 4.2%, while the long-term outlook remained unchanged at 3.3%. Only 8% of consumers now expect their incomes to grow faster than inflation, down from 18% in December 2024.

The University of Michigan's Consumer Sentiment Index was revised higher to 55.2 in July 2026 from a preliminary reading of 54.0, reaching its highest level since February, before the US-Iran conflict drove gas prices higher. Sentiment improved across all income, age, education, wealth, and political groups. Consumers' five-year outlook for business conditions climbed to a 12-month high, though it remained well below its historical average. Despite the improvement, overall sentiment was still 11% lower than a year earlier, reflecting continued concerns over elevated prices and the lasting effects of several years of high inflation. Year-ahead inflation expectations eased to 4.2% from 4.6% in June, while long-run expectations held steady at 3.3%. Interviews for the survey were conducted between June 23 and July 27.