Washington, DC, August 18, 2006-- Worries about inflation pushed U.S. consumer sentiment in early August to the lowest level since October, according to media reports of proprietary research from the University of Michigan.
The University Mich consumer sentiment index dropped to 78.7 in August from 84.7 in July, media reports said. The index is at its lowest level since October.
Economists were expecting the index to slide to 83.6.
Inflation fears spiked, with consumers expecting inflation of 4.2% over the next 12 months, up from 3.2% expected last month. The Federal Reserve closely watches the inflation expectations in the UMich survey for signs that an inflationary psychology has taken hold.
The increase in inflation expectations could bring the Fed back into a rate-hiking mode after taking a pause in early August in its two-year tightening cycle.
The current conditions index dropped to 100.8 in August from 103.5 in July. It's the lowest since May.
The expectations index fell from 72.5 in July to 64.5 in August, the lowest since October.
Consumer sentiment indexes are not considered particularly good indicators of consumer spending, but they do provide insight into consumer psychology and attitudes.
The consumer sentiment index has been gradually declining since December's 91.5. The index peaked at 96.5 in July 2005, just before devastating hurricanes ripped into the Gulf Coast.
