Consumer Sentiment Takes a Hit
Consumer sentiment worsened in August, marking a reversal from two consecutive months of improvement. This downturn comes as President Donald Trump imposed new tariffs on nearly 70 countries, affecting shopper attitudes. The University of Michigan Survey data revealed that consumer sentiment has returned to a months-long downturn that began after Trump took office. At its lowest point, consumer sentiment fell close to its worst level since a bout of inflation three years ago, remaining below where it stood in December before Trump’s presidency.
Inflation Expectations Rise
Year-ahead inflation expectations saw an increase from 4.5% last month to 4.9% this month. This puts anticipated inflation well above its current level of 2.7%. Notably, the heightened inflation expectation was observed across all political affiliations. The survey’s findings are significant, as they indicate a widespread concern among consumers about the potential impact of tariffs on prices.
Economic Indicators
Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a crucial indicator of the nation’s economic outlook. Recent indicators suggest the onset of an economic slowdown. A report on gross domestic product (GDP) showed average annualized growth of 1.2% over the first half of 2025, significantly lower than the 2.8% growth seen last year. A jobs report released by the U.S. Bureau of Labor Statistics on August 1 revealed a sharp cooldown of the labor market.
Controversy Surrounding Labor Statistics
The firing of BLS Commissioner Erika McEntarfer by President Trump has sparked controversy. McEntarfer, a Biden appointee with two decades of federal government service, was accused without evidence of producing "faked" statistics. The move has been condemned by William Beach, a former commissioner of the Bureau of Labor Statistics appointed by Trump. Beach stated that the firing sets a "dangerous precedent" and undermines the statistical mission of the Bureau.
Resilience in the Economy
Despite concerns about an economic slowdown, some facets of the economy have shown resilience. The U.S. has largely avoided widespread job losses, and consumer spending ticked higher over the three months ending in June. Corporate earnings have also remained robust. The Federal Reserve opted to hold interest rates steady at a meeting in July, citing concerns about a possible rekindling of inflation due to Trump’s tariffs.
Conclusion
In conclusion, the recent downturn in consumer sentiment, combined with rising inflation expectations and slowing economic growth, suggests a challenging outlook for the U.S. economy. While some areas of the economy have shown resilience, the impact of tariffs and the controversy surrounding labor statistics have contributed to uncertainty. As the economic landscape continues to evolve, it is essential to monitor key indicators and assess the effects of policy decisions on the nation’s economy.
