Consumer sentiment soured in August for the first time in four months as Americans grew antsy about where inflation is headed.
The latest University of Michigan consumer survey released Friday showed year-ahead inflation expectations soared to 4.9% in August from 4.5% in July. That pessimism was seen across demographic groups and political affiliations. Overall, sentiment dropped 5% month over month, the survey showed.
On an annual basis, inflation has held at 3% or lower so far this year, though core inflation stripping out more volatile food and energy prices rose 0.3% between June and July, the largest gain in six months. Hotter-than-expected wholesale inflation data released this week suggested consumers may face more pricing pressure in the months to come.
Learn more: July CPI breakdown: Consumers are feeling the crunch of accelerating inflation
Still, “consumers are no longer bracing for the worst-case scenario for the economy feared in April when reciprocal tariffs were announced and then paused,” said Joanne Hsu, the survey director, in a statement. (High country-specific tariffs took effect last week.)
Consumers in the survey also expect the job market to weaken, following what is now a three-month streak of disappointing jobs numbers. Though the unemployment rate has been hovering between 4% and 4.2% since May 2024, the US economy added 73,000 nonfarm payrolls in July, less than the 104,000 expected by economists. Meanwhile, May and June jobs figures were revised sharply downward to a total gain of just 33,000 jobs.
“The share of consumers expecting unemployment to worsen in the year ahead was about 32% in 2022 and as recently as November 2024, but is now about 60%, a reading last seen in the Great Recession,” Hsu wrote in a report that was also released Friday.
But tariff worries and recession talks aside, consumers are still getting out their credit cards: Retail sales in July were up 0.5% from the month prior.
Read more: What is inflation, and how does it affect you?
Emma Ockerman is a reporter covering the economy and labor for Yahoo Finance. You can reach her at emma.ockerman@yahooinc.com.
