Consumer sentiment in the U.S. saw its first uptick in five months, according to the University of Michigan’s latest survey. The sentiment index climbed to 67.8 in August, a slight increase from July’s 66.4 and above the 66.9 predicted by economists. This marks the highest reading of consumer sentiment since June.
Consumer sentiment under Harris/Biden is dismal. pic.twitter.com/Cm5TUIKAAP
— Paul in Texas (@PaulMac_in_TX) August 16, 2024
The improvement in sentiment comes at a time of fluctuating market conditions and evolving perceptions of the U.S. economy. Earlier concerns were fueled by a weaker-than-expected July jobs report, which raised alarms about the pace at which the labor market was cooling. This led to a brief market sell-off as investors reacted to the news.
However, the economic narrative shifted positively this week. New data indicated that inflation is continuing to decline toward the Federal Reserve’s 2% target. Meanwhile, consumer spending remains robust, and jobless claims have not seen a significant increase. Michael Gapen, head of economics at Bank of America Securities, noted in a weekly report that this week’s data offered “mostly good news,” pointing to “tepid inflation” and healthy economic activity.
Despite the positive sentiment, inflation expectations remained unchanged in August. Consumers expect inflation to be at 2.9% over the next year, with a long-term outlook of 3% over the next five to ten years. These expectations are at their lowest level since December 2020, reflecting a cautious optimism among consumers.
Political developments also played a role in shaping consumer sentiment this month. According to Joanne Hsu, director of the Surveys of Consumers, sentiment among Democrats rose by 6% as Vice President Kamala Harris gained traction in public polling. Conversely, sentiment among Republicans fell by 5%. The survey revealed that 41% of respondents believe Harris is the better candidate for the economy, compared to 38% who favor Donald Trump.
US Consumer Sentiment Increases for First Time in Five Months https://t.co/QN231ooAV2
— Henry Streator (@henry_stre81829) August 16, 2024
Hsu noted that consumer sentiment often reflects current expectations about the upcoming presidential election. She added that some respondents indicated their economic outlook would change if their preferred candidate does not win.
The rise in consumer sentiment, coupled with steady inflation expectations, suggests a cautiously optimistic outlook for the U.S. economy as it navigates ongoing challenges and uncertainties.
Key Points:
i. Consumer sentiment improved in August, reaching its highest level since June, according to the University of Michigan survey.
ii. sentiment index rose to 67.8, up from 66.4 in July, surpassing economists’ expectations.
iii. Inflation expectations remained steady, with consumers anticipating 2.9% inflation over the next year.
iv. Recent economic data, including lower inflation and stable consumer spending, contributed to the positive sentiment.
v. Political developments, particularly around the presidential race, also influenced the survey results.
Lap Fu Ip – Reprinted with permission of Whatfinger News
