Consumer Sentiment Fell to 51 in August, Reversing Two Months of Gains

American consumers turned more pessimistic in August. The University of Michigan's closely watched sentiment index fell to a preliminary 51.0, giving back the gains of the previous two months and coming in below what forecasters expected.

What the survey found

The index dropped from 55.2 in July to 51.0, against expectations of about 54.5. The decline was broad. Both sub-indices fell: the reading on current economic conditions slipped to 51.8, and the measure of consumer expectations dropped to 50.6.

• Headline sentiment: 51.0, down from 55.2
• Current conditions: 51.8, down from 54.8
• Expectations: 50.6, down from 55.4
• Forecast had been roughly 54.5

Inflation expectations edged up

Consumers' inflation expectations moved the wrong way for the Federal Reserve. The year-ahead expectation rose to 4.3% from 4.2%, while the longer-run, five-year outlook held at 3.3%. Those figures sit well above the Fed's 2% goal and are one of the survey's most policy-relevant lines, because expectations can feed into actual price and wage behavior.

Who felt it most

The deterioration was sharpest among older, lower-income and less-educated respondents. One data point captures the mood: only about 8% of consumers expect their income to grow faster than inflation over the year ahead, down from roughly 18% at the end of 2024. Expectations for business conditions fell sharply for both the next year and the longer term.

Why it matters

Sentiment is a read on how households feel, not a direct measure of what they do. But a sharp fall, paired with rising inflation expectations, complicates the Fed's job heading into its September decision — it points to worry about prices at the same time confidence is slipping.