US Consumer Sentiment Declines in August Amid Tariff Concerns

Consumer sentiment in the United States declined in August, reversing two months of improvement, as new tariffs raised concerns about inflation. The University of Michigan's Consumer Sentiment Index fell to 58.6 from 61.7 in July, contrary to economists' expectations of a rise to 62.0. Joanne Hsu, director of the survey, attributed the decline to heightened inflation worries, noting a 14% drop in consumer perception of buying conditions for durable goods, marking the lowest level in a year. Year-ahead inflation expectations rose to 4.9% from 4.5%, and long-term expectations increased to 3.9% from 3.4%. The report arrived days after an inflation reading came in lower than economists had expected, offering a respite for consumers wary of significant tariff-induced price hikes. Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a key bellwether for the outlook of the nation's economy. Some recent indicators have suggested the onset of an economic slowdown. A report on gross domestic product late last month indicated average annualized growth of 1.2% over the first half of 2025, well below 2.8% growth last year. A jobs report released by the U.S. Bureau of Labor Statistics on Aug. 1 revealed a sharp cooldown of the labor market. Hours later, Trump fired BLS Commissioner Erika McEntarfer, accusing her without evidence of "faked" statistics. McEntarfer, a Biden appointee who was confirmed by the Senate in 2024, had served in the federal government for two decades prior to her firing. "It has been the honor of my life to serve as Commissioner of BLS alongside the many dedicated civil servants tasked with measuring a vast and dynamic economy," McEntarfer said in a social media post after her dismissal. "It is vital and important work and I thank them for their service to this nation." William Beach, a former commissioner of the Bureau of Labor Statistics, who was appointed by Trump, condemned the firing of McEntarfer. "The totally groundless firing of Dr. Erika McEntarfer, my successor as Commissioner of Labor Statistics at BLS, sets a dangerous precedent and undermines the statistical mission of the Bureau," Beach posted on X. Still, some facets of the economy have proven resilient. The U.S. has largely averted the type of widespread job losses that often accompany a recession. Consumer spending ticked higher over three months ending in June. Corporate earnings have remained robust. The Federal Reserve opted to hold interest rates steady at a meeting in July as the central bank voiced concern about a possible rekindling of inflation as Trump's tariffs take hold. Speaking at a press conference in Washington, D.C., last month, Powell said tariffs would likely "push up prices and weigh on economic activity" over the course of this year. But, he added, the effects would depend on the "ultimate level" of tariffs, which have frequently fluctuated.