US consumer sentiment drops to 51.0 as inflation expectations climb higher

American consumers are feeling noticeably gloomier. The University of Michigan’s preliminary Index of Consumer Sentiment fell to 51.0 in August 2026, down from 55.2 in July, a 7.6% decline that snapped two consecutive months of improvement. The numbers behind the malaise The decline was broad-based, touching both how people feel about current conditions and where they think things are headed. The Index of Consumer Expectations, which captures forward-looking sentiment, dropped 8.7% to 50.6. The Current Economic Conditions index slid 5.5% to 51.8. But the real pain showed up in business condition expectations. Short-term expectations for business conditions fell 11%, while long-term expectations cratered by 17%. Surveys Director Joanne Hsu pointed to a sharp deterioration in how consumers view the trajectory of the economy, particularly on the business side. Inflation is the primary culprit. Year-ahead inflation expectations ticked up to 4.3% from 4.2% in July. Before the escalation of the Iran conflict in February, that same one-year measure sat at 3.4%. So consumers have ratcheted up their price expectations by nearly a full percentage point in about six months. Long-run inflation...