According to the latest survey, a drop in gasoline costs has propelled US consumer sentiment to its highest level in five months at the start of July.
Preliminary data released on Friday shows the University of Michigan's consumer sentiment index for July climbed to 54.4 from 49.5 in June, surpassing market expectations of 51.
Throughout the period from June into early July, declining fuel prices have helped ease budget pressures for households. However, renewed tensions in the Middle East have since begun to push oil prices higher, complicating the inflation outlook.
The survey's data collection period spanned from June 23 to July 13, though the report notes that over 70% of responses were completed before the US airstrikes on Iran in early July. The improvement in consumer confidence was broad-based, observed across different age, income, and political groups.
Inflation Expectations
For the coming year, consumers anticipate an annual inflation rate of 4.2%, down from 4.6% in the June survey and below the market forecast of 4.4%.
For the long term, covering the next five to ten years, consumers expect an average annual price increase of 3.3%, unchanged from June and matching market expectations.
Survey Director Joanne Hsu stated, "Consumers remain concerned that inflation pressures may intensify ahead. A growing number of consumers cited the current period as a favorable time for making purchases to avoid potential future price increases."
Additionally, American households reported improved views on their personal financial situations and the broader economic outlook. The index measuring conditions for buying durable goods rose to its highest level since October of last year.
Nevertheless, the cost of living remains a primary concern for Americans. Despite data released earlier this week showing the largest monthly drop in US consumer prices since the onset of the pandemic in June, the overall inflation rate remains elevated.
Among the sub-indices, the current conditions index for July increased to 54.9, marking a four-month high, while the expectations index improved to 54, reaching its highest level since February this year.
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