The numbers: A preliminary reading of the University of Michigan’s index of consumer sentiment fell to 80.8 in July from a final reading of 85.5 in June, notching the measure’s lowest level since February.
Economists expected a reading of 86.3, according to a survey by the Wall Street Journal.
What happened: A sub-index that measures how consumers feel about the economy right now dipped to 84.5 from 88.6 in June, as consumers worried about the current pace of job gains as the economy recovers from the COVID-19 pandemic.
Consumer optimism about the next six months fell more sharply to 78.4 in July from 83.5 in June, as Americans have increasingly become concerned about the effects of rising prices. The survey showed consumers preparing for a 4.8% increase in the cost of living this year, the highest level since 2008.
Big picture: Consumers are in a better mood than they were during the worst of the COVID-19 crisis, but sentiment remains depressed relative to pre-pandemic levels.
On Tuesday, the government said that the consumer price index rose faster in the past month than at any point since 2008, fueling concerns over inflation.
What UMich said: The “decline was caused by a misjudgement by consumers in the pace that the economy would recover as the pandemic eased,” Richard Curtin, the survey’s chief economist said. “Rather than job creation, halting and reversing, an accelerating inflation rate has now become a top concern. Inflation has put added pressure on living standards, especially on lower and middle income households, and caused postponement of large discretionary purchases, especially among upper income households.”
Curtin also noted that “Consumers’ complaints about rising prices on homes, vehicles, and household durables has reached an all-time record.”