Michigan’s closely watched consumer sentiment survey fell 6% in August, with high prices and trade concerns weighing on household outlooks.

University of Michigan Survey Finds First Decline in Four Months

Index of Consumer Sentiment – University of Michigan

The University of Michigan’s Surveys of Consumers reported a notable decline in U.S. consumer sentiment in August, breaking a four-month streak of gains. The index fell to 58.2, down from 61.7 in July and well below the 67.9 reading from August 2024.

The decline—driven largely by worries about inflation and trade—puts sentiment nearly 20% lower than December 2024, when a post-election boost lifted consumer confidence. Despite the drop, sentiment remains above the April 2025 trough, when tariffs and global economic uncertainty weighed heavily on households.

“This month’s decline was visible across groups by age, income and stock wealth,” said Joanne Hsu, director of the University of Michigan’s survey program. “Although consumers no longer fear the catastrophic scenarios they anticipated in the wake of the April tariff announcements, they believe that the current trade environment continues to pose threats to multiple facets of the economy.”

Buying Conditions for Cars and Durable Goods Hit Yearly Lows

The Current Economic Conditions Index fell nearly 10% to 61.7, driven by a sharp decline in buying conditions for durable goods such as cars and household appliances.

High prices remain a central concern: 43% of consumers said rising costs are eroding their living standards, up from 39% in July and the highest reading in five months. Car-buying conditions worsened further, with many respondents citing both high prices and tariffs as major barriers.

Mentions of tariffs as a negative factor rose sharply, with nearly 62% of consumers referencing trade policy impacts—an increase from 57% in July and the highest share since May.

Inflation Expectations and Labor Market Concerns Escalate

Survey data shows that consumers expect inflationary pressures to persist well into the future. Respondents downgraded their outlooks for both short- and long-term inflation trends, suggesting price instability remains deeply entrenched in household expectations.

The Index of Consumer Expectations fell to 55.9, down from 57.7 in July and sharply below 72.1 a year earlier. Short-run business expectations dropped nearly 8%, while long-run expectations slipped 3%.

Labor market sentiment also soured. 63% of consumers now expect unemployment to rise in the next 12 months, up significantly from 37% one year ago.

Michigan’s Role in Tracking National Economic Sentiment

The University of Michigan’s monthly survey, conducted by its Institute for Social Research, has long served as a national bellwether of consumer attitudes. Its findings are closely watched by policymakers at the Federal Reserve, corporate strategists, and Michigan’s own economic planners, given the state’s role as a hub for auto manufacturing and durable goods production.

The minimum monthly change required for statistical significance at the 95% confidence level is 4.8 points for the sentiment index. August’s 3.5-point drop falls below that threshold but remains significant in directional terms, highlighting growing unease among U.S. households.

Broader Implications for Michigan and National Policy

The survey arrives at a delicate moment for Michigan’s economy, which faces direct exposure to the auto industry’s supply chain and to global tariff battles. With car-buying conditions deteriorating, Michigan manufacturers could feel the effects of cautious consumer spending in the months ahead.

Economists warn that continued inflationary pressures could further weaken consumer activity heading into 2026, complicating efforts by state and national leaders to stabilize growth.

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