US Consumer Sentiment Plunges Amid Rising Inflation Expectations

The University of Michigan's consumer sentiment index has dropped significantly in August, falling by 7.6 percent to 51. This decline reverses two months of gains and is attributed in part to higher inflation expectations, which are now at 4.3 percent over the next year.

July retail sales also saw a decline, dropping by 0.6 percent month-over-month. The largest drop in over a year signals broad-based consumer demand weakness.

The strain of high food and energy prices is hitting lower-income households hardest, with grocery store spending down nearly 2 percent from a year earlier after adjusting for inflation.

Economists say the K-shaped economy remains in place, with less affluent Americans facing the sharpest squeeze. The weaker data also carry implications for policy, as persistent price pressures increase scrutiny of the Federal Reserve's ability to contain inflation.