Americans showed declining optimism about the economy in August, with The Conference Board reporting a continued slide in consumer confidence as worries mount over inflation and interest rates.
Inflation fears, economic uncertainty dampen sentiment
The Conference Board’s recent data demonstrated that consumer confidence fell to 89.4 in August from 90.2 in July, reflecting the second consecutive monthly decline. Survey participants expressed heightened fears regarding job security, incomes, and overall business health. Key concerns cited by those surveyed included rising fuel expenses, sustained instability in the Middle East, stubborn inflation, higher food costs, and ongoing trade tensions.
The board observed that the majority of consumers now predict both inflation and interest rates will rise even more over the coming year. This outlook is especially troubling for Americans with yearly incomes below $75,000. In its August report, The Conference Board highlighted that written comments pointed to a distinctly gloomier perspective compared to July.
Heather Long of Navy Federal Credit Union, who reviewed the data, remarked, “The financial squeeze is real for middle- and moderate-income Americans right now and it’s only going to get harder if borrowing costs stay high.” Long emphasized how families making less than $75,000 are being hit hardest, as increasing interest rates eat more deeply into their ability to save or spend on non-essentials.
Borrowing costs mount as inflation sticks
The landscape for household finances has gotten tougher due to a steep rise in borrowing expenses. The yield on the 10-year Treasury note—a key benchmark for mortgages and other consumer loans—grew from 4.19% at the beginning of the year to 4.64% by Tuesday. Experts attribute this upward movement to a combination of persistent inflation, conflict between the U.S. and Iran, a worsening fiscal outlook, and increased corporate borrowing driven by investment in AI infrastructure.
These higher rates have created the most hardship for lower-income Americans. “Consumer confidence for Americans earning $75,000 or less is falling,” Long continued, pointing out that the rift between higher and lower earners has widened, particularly since renewed violence in Iran.
Parallel results are emerging from other research. According to the University of Michigan’s preliminary Consumer Sentiment Index, there was an 8% decline this month after two months of previous improvement. Joanne Hsu, who directs the university’s consumer surveys, explained that the decrease in sentiment was evident across all income brackets, but was most acute among seniors, people without a college degree, and households on the lower end of the income spectrum. “These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation,” she noted. Final numbers for August are scheduled for release on Friday.
Financial pressures squeeze family budgets
A new EY-Parthenon study revealed rising financial stress, with 54% of U.S. households reporting they had saved nothing last month. This highlights how surging essentials costs, particularly for gasoline and food, are eroding families’ ability to set aside savings. Alarmingly, one in five households said their spending outpaced their income, forcing them to spend down savings or rely on credit.
Changing financial habits have also been noted, as 72% of participating consumers in the EY-Parthenon survey said they planned to cut back on discretionary spending—a category including restaurants, clothes, beauty products, and personal care—in light of mounting financial strain. More information on the EY-Parthenon survey is available here.
Current economic perception improves even as future outlook weakens
On a more positive note, Americans now view today’s business and labor environment more favorably than in previous months. The Present Situation Index, reported by The Conference Board, climbed by 6.8 points to 121.2, breaking a three-month pattern of drops. Yet, The Conference Board underscored that this brighter assessment of current conditions is at odds with the increasingly cautious expectations about the future.
Taken together, these results indicate that although the U.S. continues to demonstrate economic resilience in jobs and business activity, consumers remain watchful amid rising expenses, tighter access to credit, and uncertainty on the global stage.