U.S. Consumer Sentiment Unexpectedly Drops Amid Inflation Concerns

U.S. Consumer Sentiment Unexpectedly Drops Amid Inflation Concerns

Partly reflecting concerns about inflation, the University of Michigan released a report on Friday unexpectedly showing a notable deterioration in U.S. consumer sentiment in the month of August.

The preliminary report said the consumer sentiment index dropped to 95.3 in August after edging down to 97.9 in July. Economists had expected the index to inch up to 98.0.

Surveys of Consumers chief economist Richard Curtin said the decrease in consumer sentiment was concentrated among households in the bottom third of the income distribution amid less favorable perceptions of market prices.

«The data suggest that consumers have become much more sensitive to even relatively low inflation rates than in past decades,» Curtin said.

He added, «Overall, the data indicate that consumers have little tolerance for overshooting inflation targets, and to the benefit of the Fed, interest rates now play a more decisive role in purchase decisions.»

The report said the index of current economic conditions tumbled to 107.8 in August from 114.4 in July, while the index of consumer expectations was unchanged from the previous month at 87.3.

On the inflation front, one-year inflation expectations in August were unchanged at 2.9 and five-year inflation expectations ticked up to 2.5 percent from 2.4 percent.

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