ANN ARBOR, Mich.–Consumer sentiment took a step back in the in August University of Michigan Survey. At its low point, consumer sentiment fell close to its worst level since a bout of inflation three years ago, the University of Michigan reported.
The survey found year-ahead inflation expectations rose from 4.5% in July to 4.9% this month, which is well above its well above its current level of 2.7%. The heightened inflation expectation occurred across people of all political spectrums.
What Survey Found
Specifically, the August survey of consumers found:
- Buying conditions for durables plunged 14%, its lowest reading in a year, on the basis of high prices.
- Current personal finances declined modestly amid growing concerns about purchasing power. “In contrast, expected personal finances inched up a touch along with a slight firming in income expectations, which remain subdued,” said Surveys of Consumers Director Joanne Hsu.
- Overall, consumers are no longer bracing for the worst-case scenario for the economy feared in April when reciprocal tariffs were announced and then paused. “However, consumers continue to expect both inflation and unemployment to deteriorate in the future,” Hsu said.
- Year-ahead inflation expectations rose from 4.5% last month to 4.9% this month. This increase was seen across multiple demographic groups and all three political affiliations.
- Long-run inflation expectations also lifted from 3.4% in July to 3.9% in August. “This month ended two consecutive months of receding inflation for short-run expectations and three straight months for long-run expectations,” Hsu said. “Still, both readings remain well below the highs seen briefly in April and May 2025.”
As the CU Daily reported here, the survey of consumer expectations around inflation comes at the same time the Federal Reserve will be holding its annual policy symposium this week in Jackson Hole, Wyo.
