Consumer Sentiment Drops as Inflation Expectations Rebound

01:08 PM EDT, 08/29/2025 (MT Newswires) -- US consumer sentiment fell in August amid concerns over economic health, while inflation expectations rebounded, final survey results from the University of Michigan showed Friday.

The main sentiment index decreased to 58.2 this month from 61.7 in July. The consensus was for a 58.6 reading in a Bloomberg-polled consensus.

"Perceptions of many aspects of the economy slipped," Surveys of Consumers Director Joanne Hsu said in a statement. "Buying conditions for durable goods subsided to their lowest reading in a year, and current personal finances declined 7%, both due to heightened concerns about high prices."

Year-ahead inflation expectations rose to 4.8% in August from 4.5% last month, following two straight months of drops. The five-year outlook ticked up to 3.5% from 3.4%, snapping a streak of three consecutive monthly declines, according to the survey.

"Both readings remain well below the highs seen briefly in April and May," Hsu said.

Government data showed Friday that US consumer spending rose last month at the fastest pace since March, while the Federal Reserve's preferred inflation metric increased annually to the highest level in five months.

The gauge for current economic conditions slumped 9.3% sequentially to 61.7 in August, while the expectations measure lost 3.1% to 55.9, the consumer sentiment survey showed.

Last week, Fed Chair Jerome Powell struck a more dovish tone than expected during his Jackson Hole speech, indicating a possible policy pivot to lower rates. At the time, Powell highlighted downside risks to employment and suggested that tariff-driven inflation pressures may prove transitory.

Markets are currently pricing in a roughly 87% probability that the central bank will lower its benchmark lending rate by 25 basis points next month, according to the CME FedWatch tool. The remaining odds are in favor of another pause.

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