An initial look at consumer sentiment for the month of August came in below expectations.
The University of Michigan's consumer sentiment index hit 95.3 for August — the lowest level since September — according to a preliminary reading released Friday. Economists polled by Reuters expected the index to hit 98 in August, up from 97.1 in July.
Richard Curtin, chief economist of the university's Surveys of Consumers said the weakness "reflected much less favorable assessments of buying conditions, mainly due to less favorable perceptions of market prices." Curtin noted, for example, that consumers viewed buying conditions for vehicles less favorably than at any time in the past four years, as "vehicle prices [are] being judged less favorably than anytime since the close of 1984."
"Overall, the data indicate that consumers have little tolerance for overshooting inflation targets, and to the benefit of the Fed, interest rates now play a more decisive role in purchase decisions," he said. "As is usual at this stage in the business cycle, some price resistance has been neutralized by rising wages, although the falloff in favorable price perceptions has been much larger than ever before recorded."
The Federal Reserve has already raised rates twice this year and is expected to hike two more times before year end. Market expectations for rate hikes in September and December are at 93.6 percent and 61.3 percent, respectively, according to the CME Group's FedWatch tool.
Inflation has been on the rise lately.The so-called core Consumer Price Index last month posted its largest increase since September 2008.