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Consumer confidence just hit a wall. The University of Michigan’s preliminary August 2026 Consumer Sentiment Index came in at 51.0, falling short of the 54.5 consensus estimate and sliding from July’s final reading of 55.2. The two-month rebound that had briefly calmed nerves? Over.
The reading also sits well below August 2025’s level of 58.2, underscoring that the deterioration in how Americans feel about the economy isn’t some seasonal blip.
The numbers behind the gloom
The Index of Consumer Expectations, which measures how people feel about the future rather than the present, dropped more sharply than the Index of Current Conditions.
Survey director Joanne Hsu pointed to a significant deterioration in expected business conditions. Short-term expectations fell 11%, and long-term projections dropped 17%.
Perhaps the most striking data point: only 8% of consumers expect their income growth to outpace inflation over the next year.
One-year inflation expectations ticked up to 4.3% from 4.2% in July. Back in February 2026, that same figure stood at 3.4%. Long-run inflation expectations, covering the five-to-ten year horizon, held steady at 3.3%.
A bumpy 2026 so far
This year has been a rollercoaster for the sentiment gauge. The index bottomed at a record low of 44.8 in May 2026. June brought a modest uptick to 49.5, and July’s jump to 55.2 had some analysts cautiously optimistic that the worst had passed.
The decline wasn’t concentrated in any single group. Hsu noted that sentiment fell across demographic and political lines, with particularly sharp reductions among Republicans, older consumers, lower-income households, and those without college degrees.
Why this matters for markets and policy
Consumer spending accounts for roughly two-thirds of US economic output.
For the Federal Reserve, the report adds another data point to an already complicated picture. The Fed pays close attention to longer-run expectations, and while the 3.3% five-to-ten year reading hasn’t budged, it remains above the levels that would signal inflation expectations are truly anchored back at the 2% target.
The final August reading, scheduled for release on August 28, 2026, at 10 a.m. ET, will determine whether the preliminary number holds or gets revised.
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