US consumer confidence improved for a second consecutive month in July, reaching its highest level in five months, signaling a moderation in household pessimism about the economy amid brighter economic outlooks and relatively stable gasoline prices near recent lows. Data from the University of Michigan released on Friday showed the final consumer sentiment index for July rose to 55.2, surpassing the preliminary reading of 54.4 and June's level. The survey was conducted between June 23 and July 27, during which gasoline prices briefly fell to their lowest since March, though tensions in the Middle East later pushed oil prices up, overall levels remained below wartime highs.
Joanne Hsu, director of the University of Michigan's Surveys of Consumers, noted that respondents remain primarily focused on issues directly tied to household finances, such as purchasing power, with political and geopolitical factors having a relatively smaller impact. She pointed out that despite the recent improvement, the index remains 11% lower than a year ago, indicating households still hold a cautious view of the U.S. economy. Meanwhile, consumer spending continues to show resilience. Data released earlier this week revealed that inflation-adjusted real consumer spending in June rose 0.4% month-over-month, one of the largest gains in nearly a year, highlighting robust demand despite elevated prices.
Key indicators for durable goods buying intentions surged to their highest level since last October, reflecting consumers' willingness to purchase long-lasting items like cars and appliances. Both sub-indexes measuring current economic conditions and future expectations improved from the previous month. Confidence also strengthened across income levels, age groups, educational backgrounds, and political affiliations, with the long-term economic outlook index reaching a one-year high.
On inflation expectations, consumers forecast a 4.2% annual inflation rate over the next year, down from the previous month. Long-term inflation expectations for the next five to ten years remained steady at 3.3%, unchanged from June. Notably, artificial intelligence (AI) has become an increasingly significant topic in consumer surveys. Joanne Hsu said that overall, respondents rated AI more negatively. While some consumers believe AI enhances productivity, a larger number fear its potential negative impact on the job market.
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