(July 17): US consumer sentiment rose in early July to a five-month high as lower gasoline prices boosted morale.
The University of Michigan’s preliminary sentiment index increased to 54.4 in July, from 49.5 in June, according to the survey released on Friday. That topped all estimates in a Bloomberg survey of economists.
Gasoline prices fell through June and into early July, helping ease pressure on household budgets. Since then, renewed fighting in the Middle East has started to push gas prices higher and muddied the outlook for inflation.
The survey period includes responses from June 23 to July 13, though the report indicated more than 70% were completed prior to the US strikes on Iran in early July. The improvement in sentiment was broad-based across age, income and political affiliation.
Consumers expect prices to rise at an annual rate of 4.2% over the next year, down from 4.6% in June. They also saw costs rising at an annual rate of 3.3% over the next five to 10 years, in line with June.
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“Consumers continue to worry that inflation pressures may worsen going forward,” Joanne Hsu, director of the survey, said in a statement. “A growing share of consumers reported that buying conditions were favourable now to avoid price increases in the future.”
Households’ perceptions of their financial situation and the broader economy improved. A gauge of buying conditions for durable goods picked up to the highest since October.
The cost of living remains a key frustration for Americans. While data out earlier this week showed consumer prices fell in June by the most since the onset of the pandemic, inflation remains elevated.
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The current conditions gauge rose to a four-month high of 54.9 in July, while the expectations index improved to 54 — the highest since February.
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