Consumer confidence falls for first time in four months ahead of key inflation data

According to a new survey conducted by the University of Michigan, consumer confidence in the state of the economy fell in August for the first time in four months as new inflation data comes out.

The UMich survey found on August 15th that the index of consumer sentiment fell to 58.6 in August, an over 3-point drop from the previous reading in July, 61.7. Furthermore, current economic conditions fell from 68 in July to 60.9 in August; lastly, the index of consumer expectations fell sightly from 57.7 in July to 57.2 now.

Overall, consumer sentiment fell by a whopping 5% over the previous month, the first decline in four months. According to the University of Michigan, this decline largely stems from "rising worries about inflation" as "buying conditions for durables plunged 14%, its lowest reading in a year..."

According to the July Producer Price Index (PPI) Report, inflation in a core basis (excluding volatile food and energy products) rose by a staggering 0.9%, the greatest single monthly increase since May 2022. In addition, a previous CPI report showed similar increases in inflation, causing consumers to panic.

"Consumers have developed stress tolerance, the ability to function normally while carrying constant anxiety," said Katie Thomas, lead author of the Kearney Consumer Institute, in response to recent data like the UMich survey. "We’re living in an atmosphere of pervasive, ambient consumer anxiety. Housing stress, inflation fatigue, and optimistic jobs data all exist at once. These mindsets explain the resulting behavioral swings, often within the same week."

Joanne Hsu, the director of surveys like this in the University of Michigan, stated in the report, "Consumers are no longer bracing for the worst-case scenario for the economy… However, consumers continue to expect both inflation and unemployment to deteriorate in the future."

As inflation data and consumer confidence reports show a worrying trend in the economy, odds of a September rate cut decline despite strong job growth.