Consumer sentiment dropped about 6% from last month, landing around 11% below a year ago amid continued worries that inflation will remain elevated for the foreseeable future, according to the University of Michigan Surveys of Consumers.
Sentiment declines in August were seen for all political groups and were particularly acute among Republicans. Groups who are typically less-equipped to absorb increases in cost of living also exhibited stronger declines in sentiment, including older consumers, lower- and middle-income consumers and those without a college degree.
"With ongoing policy uncertainty including the Iran conflict, consumers anticipate further increases in gasoline prices both in the short and long run," said U-M economist Joanne Hsu, director of the surveys. "In addition to the pocketbook issues that have been central to consumers' views of the economy, they are increasingly worried that prospects elsewhere in the economy could be weakening."
Expected year-ahead business conditions fell back 10%, along with a 13% drop for the five-year horizon. Any reescalation of trade tensions will likely exacerbate these trends. This release covers interviews completed between July 28 and August 24.
Consumers increasingly expect their buying power to erode
A growing 53% of consumers spontaneously mentioned that high prices are weighing down current personal finances, up from 50% last month and 45% in January 2026.
"Looking ahead to the future, consumers expect their purchasing power to erode," Hsu said. "Expectations for consumers' own inflation-adjusted incomes have broadly weakened over the past year and a half, with a growing majority expecting inflation to outstrip income gains."
Only 10% of consumers expect their purchasing power to increase in the year ahead.
Inflation seen as greater risk to economy than unemployment
Consumers are worried about the potential impact of inflation on the economy more generally. Recent months of data show that consumers increasingly believe inflation poses greater risks to the economy than unemployment, according to Hsu.
At the beginning of the year, when asked which factor will present more serious hardship for people, 23% of consumers named inflation and 14% reported unemployment (the remaining indicated both equally).
This month, the share naming inflation climbed to 36%, while only 6% selected unemployment.
Consumer Sentiment Index
The Consumer Sentiment Index fell to 51.7 in the August 2026 survey, down from 55.2 in July and below last August's 58.2. The Current Index fell to 51.9, down from 54.8 in July and below last August's 61.7. The Expectations Index fell to 51.5, down from 55.4 in July and below last August's 55.9.
About the surveys
The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by web. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current Economic Conditions Index and Index of Consumer Expectations, the minimum is 6 points.
About ISR
Established in 1949, the Institute for Social Research at the University of Michigan is among the world's oldest social science research organizations and a world leader in the development and application of social science methodology. ISR conducts some of the most widely cited surveys and studies in the nation, including the University of Michigan Surveys of Consumers, American National Election Studies, Monitoring the Future Study, Panel Study of Income Dynamics, Health and Retirement Study, National Survey of Black Americans and World Values Survey. ISR is also home to the Inter-University Consortium for Political and Social Research, which maintains the world's largest computerized social science data archive.
