Consumer sentiment improved markedly above expectations preliminary University of Michigan Consumer Sentiment for July showed. The index came in at 72.6 (consensus 65.5) versus the final reading of 64.4 for June. Highest since September 2021. In the same period a year ago, the index stood at 51.5. The takeaway is the economic outlook has improved with the slowdown in inflation and the ongoing stability in labor markets. Current conditions rose to 77.5 versus 70.4 estimate and 69.0 last month, Expectations rose 69.4 versus 61.8 estimate and 61.5 last month.
US consumer sentiment and inflation expectations data from the University of Michigan
- The preliminary July University of Michigan Consumer Sentiment Index checked in at 72.6 (consensus 65.6) versus the final reading of 64.4 for June.
- In the same period a year ago, the index stood at 51.5.
- Current conditions 77.5 versus 70.4 estimate and 69.0 last month
- Expectations 69.4 versus 61.8 estimate and 61.5 last month
- 1-year inflation rises to 3.4% from 3.3% last month
- 5-10 year inflation rises to 3.1% from 3.0% last month
Surveys of Consumers Director Joanne Hsu:
Consumer sentiment rose for the second straight month, soaring 13% above June and reaching its most favorable reading since September 2021. All components of the index improved considerably, led by a 19% surge in long-term business conditions and 16% increase in short-run business conditions. Overall, sentiment climbed for all demographic groups except for lower-income consumers. The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets. As seen in the chart, sentiment is now about halfway between the all-time historic low of 50 from June 2022 and the February 2020 pre-pandemic reading of 101.
Year-ahead inflation expectations were little changed, inching up from 3.3% in June to 3.4% in July and down from the high point of 5.4% from April 2022. Long-run inflation expectations were also virtually unchanged from June at 3.1%, again staying within the narrow 2.9-3.1% range for 23 of the last 24 months.
The final survey result will be released on Friday, July 28, 2023 at 10am ET.
Home prices and real estate stability are massive factors for the American consumer. The report reflects some of the improved reports we have seen in new and pending home sales, mortgage applications. The accompanying chart shows we are near 40-year lows for sentiment to buy a house. Improved in affordability would help an improvement here.
About University of Michigan Consumer Sentiment Index
The University of Michigan Consumer Sentiment Index is a widely followed indicator of consumer confidence in the US economy. It is based on a survey of 500 households and measures their attitudes and expectations about the economy, personal finances, and buying conditions. The Index is released on the 10th of each month and provides insight into consumer spending, which is a significant component of the US economy.
A high reading of the Consumer Sentiment Index suggests that consumers are optimistic about the economy and their personal financial situation, and are more likely to spend money. Conversely, a low reading of the Index indicates that consumers are pessimistic and may be less likely to spend.
Overall, the University of Michigan Consumer Sentiment Index provides valuable insight into consumer behavior and sentiment, and is closely watched by economists, investors, and policymakers as an indicator of the health of the economy.
Source: University of Michigan
From The TradersCommunity News Desk