Consumer sentiment reaches five-month high

Consumer sentiment increased to its highest mark in five months in July as gas prices fell in recent weeks, according to the University of Michigan Surveys of Consumers. .The consumer sentiment index increased 10 percent to 54.4 from 49.5 in June, but was still 11.8 percent under its year-ago mark. Director Joanne Hsu said the increase could be challenging to keep up if recent drops in gas prices continue to reverse. Interviews were taken June 23 to July 13, most before the United States continued to strike Iran and gas prices increased. U.S. gas prices have increased back to an average of $4.00 per gallon due to rising tension in the Middle East and breakdown of the ceasefire between Iran and the United States. The index tracking current economic conditions increased 15 percent to 54.9 from 47.7 last month, but was down 19 percent on an annualized basis. The consumer expectations index increased 6.5 percent to 54.0 from 50.7 in June, but was down 6.4 percent from 57.7 in July. “This month’s rise in sentiment was pervasive across the population, seen across groups by age, income, wealth and political party,” Hsu said. “Particularly strong increases were seen among consumers without a bachelor’s degree.” Inflation expectations for the next 12 months dropped to 4.2 percent from 4.6 percent in June, still higher than the 3.4 percent in February when the war in Iran started. Long-term inflation expectations remained at 3.3 percent, higher than the range of 2.8 percent to 3.2 percent in 2024. Increased consumer confidence was also reflected by The Conference Board Consumer Confidence Index increased 0.6 points to 91.2. The index based on assessments of current business and labor market conditions dropped 3.0 points to 116.4. The index tracking consumers’ short-term outlook for labor market, income and business conditions, increased 3.0 points to 74.4. “Falling oil prices in recent weeks provided some relief to consumer inflation fears,” said The Conference Board Chief Economist Dana Peterson.