U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade, in a worrying sign for the economy as Americans gave faltering outlooks on everything from personal finances to inflation and employment, a survey showed on Friday.

The unexpected reading could give Federal Reserve policymakers pause if it translates in the months ahead to a dent in economic activity. The central bank has been getting closer to a decision on when to begin pulling back the extraordinary stimulus it put in place to shield the economy from the COVID-19 pandemic.

The University of Michigan said its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011, and there have been only two larger declines in the index over the past 50 years. Those were at the depths of the 2007-2009 recession and during the first wave of shutdowns in April 2020 at the beginning of the pandemic.

The losses were widespread across income, age, and education subgroups and spanned all regions. Economists polled by Reuters had forecast the index would remain unchanged at 81.2.

U.S. stock market indexes slipped immediately after the report was released, while the price of gold gained ground. U.S. Treasury bond yields hit session lows.

"The renewed plunge suggests the latest wave of virus cases driven by the Delta variant could be a bigger drag on the economy than we had thought," said Andrew Hunter, an economist at Capital Economics.

Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States' largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018.  REUTERS/Mark Makela
Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States' largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018. REUTERS/Mark Makela

Economic growth is still expected to grow this year at its fastest pace in four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic. But the recovery is showing some indication of cooling off.

COVID-19 cases have doubled in the past two weeks to reach a six-month peak as the more transmissible Delta variant spreads rapidly across the country. Labor shortages across the service sector also persist while supply chain disruptions have continued.

"The pandemic's resurgence due to the Delta variant has been met with a mixture of reason and emotion...mainly from dashed hopes that the pandemic would soon end," Richard Curtin, the survey director, said in a statement.

The survey's gauge of current economic conditions also declined to a reading of 77.9 from 84.5 in July while its measure of consumer expectations slid to 65.2 from 79.0 in July.

The survey also showed consumers raising their expectations for medium-term inflation, another measure the central bank is closely monitoring to ensure that inflation expectations remain anchored.

The survey's one-year inflation expectation edged lower to 4.6%, down from 4.7%, but its five-year inflation outlook ticked up to 3.0% from 2.8% in July.

Consumer price increases slowed in July, the Labor Department said on Wednesday, but inflation overall remained at a historically high level amid lingering supply-chain disruptions and stronger demand for travel-related services.

All civil servants in Canada must be vaccinated by the end of October or risk losing their jobs, the government has announced.

The mandate also applies to workers in federally regulated sectors, like rail.

Commercial air, cruise, and interprovincial train passengers must also be vaccinated to travel.

Canada has one of the highest Covid vaccination rates in the world, with 81% of eligible people have received at least one dose.

"This is the best way to end the pandemic and allow the economy to safely remain open," said Intergovernmental Affairs Minister Dominic LeBlanc on Friday.

In Canada, provinces have a record of who has received vaccines. Mr LeBlanc added that testing and screening procedures will be implemented for those who cannot be vaccinated for medical reasons.

The minister said that the government - the nation's largest employer - must "lead by example" in the fight against Covid-19.

Transport Minister Omar Alghabra said that the decision is also aimed at restoring public confidence in travel.

He added that the federal government would work with travel operators and other industry players to develop a "measured and practical approach" to the vaccine policy ahead of the October deadline.

The mandate may influence voters in the general election Prime Minister Justin Trudeau is widely expected to call for September.

A recent Ekos research poll shows that a third of Conservative voters oppose vaccine requirements. Most supporters of the ruling Liberal Party are in favor.

On Thursday, Canada's chief public health officer, Dr Theresa Tam, warned that the nation is in the midst of a fourth Covid wave. There are now over 13,000 active Covid-19 cases in the country.

International Business Machines Corp (IBM.N) said on Friday that it would allow only fully vaccinated U.S. employees to return to offices, which are set to open from Sept. 7, given the rapid spread of the Delta variant of COVID-19.

"We will still open many of our U.S. sites, where local clinical conditions allow, the week of Sept. 7. However, the reopenings will only be for fully vaccinated employees who choose to come into the office," Chief Human Resources Officer Nickle LaMoreaux said in a memo sent to employees.

The resurgence of COVID-19 cases in the United States due to the Delta variant and the new guidance from the U.S. Centers for Disease Control and Prevention (CDC) that requires fully vaccinated individuals to wear masks have led companies to change their plans on return to the office, vaccinations, and masking.

The technology firm also asked its employees to get fully vaccinated, joining other big techs to fight the spread of the virus.

Earlier on Thursday, Facebook Inc (FB.O) has pushed back its official return date for all U.S. and some international employees until January 2022, while AT&T Inc (T.N) said it will require management employees to be vaccinated before entering a work location.