Trump Economy Faces Reckoning as Sentiment and Sales Slide

Consumer sentiment sank to a preliminary August sentiment index of 51.0 from 55.2 in July while July retail sales fell 0.6 percent, the largest drop in more than a year. Affordability pressures tied to the Iran conflict are darkening how Americans judge Donald Trump’s economy.

About three-quarters of adults now rate conditions only fair or poor. Rising prices top the list of complaints.

The Hard Numbers Land at Once

The University of Michigan Surveys of Consumers released its early August reading on August 14. The overall index dropped 7.6 percent month to month and 12.4 percent from a year earlier. Current conditions slipped to 51.8. Expectations fell harder, to 50.6.

Director Joanne Hsu noted the slide ended two months of gains. Views of personal finances held up better than expected business conditions, which sank 11 percent short-term and 17 percent long-term.

The same day the Commerce Department reported July retail and food services sales of $763.6 billion, down 0.6 percent from June after seasonal adjustment. That was the first decline since October and the largest in 14 months. Economists had expected a small rise. Sales were still up 5.0 percent from July 2025.

• Core pullback: Nonstore retailers fell 2.2 percent after Amazon shifted Prime Day into June.
• Autos and fuel: Motor vehicles dropped 1.8 percent; gasoline stations fell 0.9 percent.
• Control group: Sales excluding autos, gas, building materials and food services, a GDP input, declined 0.4 percent.

Year-ahead inflation expectations edged up to 4.3 percent. Only 8 percent of consumers now expect their incomes to outpace inflation, half the share from late 2024.

Iran Conflict Keeps Feeding Higher Costs

The war that began earlier in 2026 continues to push energy prices. The AAA national average for regular gasoline stood near national average near $4.08 a gallon in mid-August, the highest August reading on record in recent data. Prices had briefly dipped toward $4 before climbing again on Strait of Hormuz uncertainty.

That matches the pattern tracked in related coverage of gas prices back above $4 a gallon. Diesel and jet-fuel surcharges ripple into shipping and grocery shelves. Food and consumer goods remain top household worries alongside housing and healthcare.

Pew Research found 56 percent of adults very concerned about gasoline prices in July, up sharply from 34 percent in January before the military action intensified. Concern about food and goods held at 66 percent. Electricity sat at 54 percent.

1. February-March 2026: Initial strikes drive first oil and gas spikes.
2. May 2026: Sentiment hits a series low near 44.8 on war and inflation fears.
3. July-August 2026: Retail stall and fresh sentiment drop arrive as costs stay elevated.

Long-run inflation expectations held at 3.3 percent, still above the 2024 range.

Even Trump Supporters Register the Pain

Declines hit every political group. Republicans posted the largest monthly drop. Their sentiment now sits 19 percent below levels just before the Iran conflict and at the lowest point since the 2024 election.

Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August. Sentiment among Republicans is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election.

Joanne Hsu of the University of Michigan Surveys of Consumers wrote those lines in the August release. Older, lower-income and non-college consumers saw the sharpest hits. Those groups feel purchasing-power erosion first.

Pew data from July already showed Republican positive ratings of the economy slipping to 41 percent from 49 percent in January. The share of Republicans saying Trump’s policies made conditions worse rose to 28 percent from 18 percent. Overall, six-in-ten say Trump policies worsened conditions, up from 52 percent earlier in the year.

On X and in reply threads, the gap between official claims of a strong economy and daily grocery and rent bills drew sharp comments. Many noted that base voters still feel the pinch even when stock indexes hold up.

Who Carries the Heaviest Load

Lower-income households and those without college degrees report the steepest confidence losses. Black voters, women and younger adults have long shown higher pessimism in earlier surveys. Working-class respondents who backed Trump in 2024 now split more evenly on whether the economy is doing well.

Nearly half of adults in multiple polls say the cost of living is the worst they can remember. Difficulty covering a surprise $500 expense remains common below the $100,000 income line. Healthcare, housing and food stay the core stressors.

Stock-market wealth supports higher-income spending. That insulation does not reach the groups driving the sentiment collapse. The result is a two-track economy visible in the data.

Approval Numbers Mirror the Strain

Recent Economist/YouGov tracking put Trump’s overall job approval near 33-34 percent, with net ratings deeply negative. Handling of inflation and prices has scored especially poorly, at times near a -44 net. Economy-specific approval has sat in the low 30s in Marist and other surveys.

More Americans now assign responsibility for current conditions to Trump than to the prior administration. Midterm positioning already treats the cost of living as the central issue. Optimism that conditions will improve in a year has fallen to 23 percent in Pew’s July reading.

Labor-market softness adds another layer. Recent jobs reports have shown signs of deeper labor softness signals in recent jobs data that could compound spending caution if hiring slows further.

Spending Pullback Starts to Show

The July retail drop followed strong earlier months lifted by tax refunds that have now faded. Amazon’s calendar shift pulled some sales forward. Yet the breadth of the decline, including the control group used for GDP estimates, points to genuine caution.

Economists cut third-quarter growth forecasts after the release. Consumers remain supported by equity wealth in some segments, but higher prices for necessities leave less room for discretionary buys. Gasoline stations and vehicle dealers both weakened.

If sentiment stays low into the final August reading and September data, the spending slowdown could feed on itself. Sticky inflation expectations above 4 percent keep the Federal Reserve in a difficult position.

The combination of war-driven energy costs, earlier policy choices and the resulting squeeze on household budgets has now registered in the two most watched real-time gauges of how people feel and how they spend. That is the reckoning visible in the August numbers.