United States consumer sentiment deteriorated sharply in early August as consumers grew increasingly concerned about the rising cost of living amid the conflict in the Middle East, according to a survey released on Friday.
The University of Michigan's Surveys of Consumers said its Consumer Sentiment Index fell to 51.0 in August from 55.2 in July, ending two consecutive months of improvement.
Markets had expected the index to come in at 54.5.
"Consumer sentiment fell about 8% this August, ending two consecutive months of improvement. While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run," said Joanne Hsu, the director of the Surveys of Consumers.
"Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August. Sentiment among Republicans is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election.
"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.
"These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation.
"Across all consumers, only 8% expect their income growth to exceed inflation in the year ahead, down from 18% in December 2024, a reflection of the belief that high prices will continue to be burdensome."
The survey's measure of consumer expectations for inflation over the next year rose to 4.3% from 4.2% in July.
Meanwhile, consumers' expectations for inflation over the next five years remained unchanged at 3.3%.
