US consumer confidence falls in August amid bleak outlook on jobs and business conditions

American consumers are feeling gloomy about the future, even as they acknowledge the present isn’t terrible. The Conference Board’s Consumer Confidence Index slipped to 89.4 in August, down from a revised 90.2 in July, marking its lowest reading since January 2026.

A tale of two indexes

The Consumer Confidence Index is actually built from two components, and in August they moved in opposite directions. The Present Situation Index, which measures how people feel about current business and labor conditions, climbed 6.8 points to 121.2. The Expectations Index, however, fell 5.8 points to 68.2, reflecting deepening pessimism about business conditions, the labor market, and personal income over the next six months.

The Expectations Index sitting at 68.2 is particularly notable because readings below 80 have historically been associated with recession risk.

Inflation expectations creep higher

One of the more stubborn data points in the August survey: consumers now expect inflation to run at 5.8% over the next 12 months, up from 5.6% in July.

Conference Board Chief Economist Dana M. Peterson pointed to specific pain points driving the pessimism. Gasoline prices exceeding $4 per gallon are weighing on household budgets, and geopolitical tensions, particularly related to the US-Iran situation, are adding a layer of uncertainty. The survey was conducted between August 3 and 16, with results released on August 25.

What this means for markets and spending

Retailers and consumer-facing companies are the most directly exposed. When people feel uncertain about their financial future, discretionary spending is usually the first casualty. Essential spending holds up, but margins in the consumer sector tend to compress when confidence is this low.

The present situation component offers a small silver lining. The fact that perceptions of current job availability improved suggests the labor market hasn’t deteriorated meaningfully yet.

Defensive sectors, think utilities, healthcare, and consumer staples, tend to outperform during periods of deteriorating consumer sentiment and rising inflation expectations.

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