U.S. consumer sentiment is at year‘s weakest point: Univ. of Michigan

Consumers expect higher prices as a result of increased tariffs.

The numbers: The University of Michigan consumer sentiment index was revised slightly higher in its final August estimate but remained at the lowest reading of the year. The UMich index was 96.2 in August, below July’s level of 97.9. The preliminary reading was 95.3. Economists had expected a final reading of 95.5.

What happened: Most of the August decline was in the current economic conditions index, which fell to its lowest level in almost two years, .The worsening mood came despite strong gross domestic product. The causes of the decline were less favorable assessments of buying conditions, caused by worries about prices and rising interest rates. Inflation expectations for the next year rose to 3.0% from 2.9% in July while expectations for the next five years increased to 2.6% from 2.4% in July, the highest in four years.

Big picture: Sentiment is still trending higher and economists don’t expect a material slowdown in consumer spending. The survey may be capturing concerns over higher inflation and uncertainty regarding tariffs, economists said. Other measures of consumer confidence have been strong. The Conference Board index rose more than five points .

What are they saying? While consumer sentiment was down on concerns over affordability, higher after-tax incomes, a strong labor market, and above-trend growth continue to anchor attitudes, said Pooja Sriram, economist at Barclays, in a note to clients.

Market reaction: Stocks  moved up and down in thin trading on Friday, reacting mainly to ongoing trade talks between the U.S. and Canada.