Consumer sentiment in the US took a surprising turn in August due to inflation concerns. A barometer of consumer sentiment fell to 106.1 points from a revised 114.0 in July, the Institute’s Conference Board reported in its survey on Tuesday. Economists polled by Reuters had expected 116.0 points. “Consumers are again struggling with rising prices in general, particularly for food and gasoline,” said Dana Peterson, chief economist at the Conference Board.

Consumers rated both the situation and prospects very negatively. The barometer for expectations fell to 80.2 points from 88.0. So it is just above the 80 mark, which is considered a bearish signal for the coming year. “As job vacancies shrink and interest rates continue to rise, consumers may hear bad news about corporate earnings, making big purchases more expensive,” Peterson said.

A sharp rise in consumer prices continues to reduce the purchasing power of consumers. However, overall inflation remained on the decline, although the inflation rate came in at 3.2% in July, slightly higher than June’s figure of 3.0%. However, the US Federal Reserve is targeting 2.0%. A series of hikes has pushed the key interest rate to 5.25-5.50%. It is unclear whether interest rates have peaked. Another hike may be needed, according to Fed Chair Jerome Powell. At the same time, he took a cautious approach at the Fed’s forum in Jackson Hole. So monetary authorities will carefully weigh the pros and cons of further tightening. Despite successive rate hikes, inflation remains high.

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Reuters

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