Consumer Sentiment Slides to 51 as Retail Spending Cools

The University of Michigan's preliminary August consumer sentiment index fell roughly 8% to 51.0, well below the 55.0 economists expected and down from July's final reading of 55.2. The decline ended two straight months of improvement. Current conditions slipped to 51.8 from 54.8 and the expectations component dropped to 50.6 from 55.4, with expected business conditions sinking 11% for the short run and 17% for the long run.

The pullback was broad but concentrated among older consumers, lower-income households and those without a college degree — the groups most exposed to any erosion of purchasing power. Year-ahead inflation expectations ticked up to 4.3% from 4.2%, while the five-to-ten-year measure held at 3.3%. Softer July retail spending data landed the same morning, reinforcing the picture of a consumer growing more cautious.

Equities pulled back from record territory on the data. The S&P 500 closed down 0.2% at 7,785.76, the Dow fell 107.58 points to 53,732.41 and the Nasdaq Composite shed 0.3% to 26,729.16. Chipmakers led the declines. Even so, the S&P 500 finished its third consecutive weekly advance, leaving the benchmark within reach of the record close it set Thursday after benign CPI and PPI prints.