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The just released Reuters University of Michigan report on consumer sentiment is the preliminary report for August. While we argue that this reading focuses on far too few households to be a truly representative number for an economic reading, we also admit that this is actually one of the first nearly real-time economic reports that comes out each month. Consumer sentiment appears to have hit the skids, with rehab looking only like a dream.

Sentiment fell to 80.0 from 85.1 in August. Bloomberg and Dow Jones were both expecting a consensus reading of about 85.5. Bloomberg even had the range pegged at 82.5 to 87.0. In short, this is a huge disappointment.

The sentiment of 85.1 in July was apparently the highest reading since in about five or six years, and the problem with this drop is that in July the implied reading for the final two weeks of the month was even higher than the preliminary report in July. That is supposed to indicate positive momentum. Unfortunately that is just not the case today.

Here is where things have gone awry: The current index was 91.0, but the expectations fell to 72.9. In short, today looks very strong, but consumers are expecting the wheels to come off the wagon. Do we dare tie in the poor expectations from Wal-Mart Stores Inc. (NYSE: WMT) showing that consumers are only willing to buy the basics?

The markets have not really reacted to this news, which we find somewhat surprising. Even if we do not like this report’s methodology, it is so far off of the estimates that it stands out massively.