As of the first week of August, the University of Michigan’s measure of consumer confidence rose from 66.4 the previous month to 67.8. It’s the first rise after four months of falls.
Wall Street Journal asked economists and found that most of them thought the reading for August would be 66.6.
Important facts: The study says that a measure of how consumers felt about the current situation dropped from 62.7 in July to 60.9 in August. That level hasn’t been that low since December 2022.
But a measure of how they feel about the future went up from 68.8 to 72.1, which is the highest number since April.
A group of researchers at Michigan says that politics is affecting the numbers.
When Vice President Kamala Harris took over as the Democratic presidential choice from President Joe Biden, Democrats’ mood went up by 6%. For Republicans, feelings went the other way and dropped by 5%.
How people think inflation will change is another important part of the study.
The study says that Americans’ expectations for overall inflation over the next year stayed the same from July to August at 2.9%. Their expectations for inflation over the next five years stayed the same at 3% for the last five months.
Economists at the Federal Reserve think that companies will be able to raise prices more easily if people expect high inflation. This means that there is a greater chance that prices will rise.
Overall, the sentiment measure is still a long way below its pre-pandemic high point of 101 in February 2020.
High interest rates have been hard on consumers, but there hasn’t been a strong link between buying and mood. There is more hope that the U.S. will avoid a recession after good retail sales in July.
According to a recent note to clients from Michael Pearce, deputy U.S. chief economist at Oxford Economics, consumers are voting with their wallets. He said that household spending is still in good shape, but there are signs that the weakening job market is making spending by more vulnerable consumers slow down.
The University of Michigan said that consumer expectations could change as the presidential campaign gets more attention. However, consumers still think that inflation will stay stable, which is their main concern, according to Joanne Hsu, who is in charge of surveys of consumers at the university.
In the future: “These survey results from early August give us a hint that consumer spending may go up even more.” Carl Weinberg, chief economist at High Frequency Economics, said, “Consumers are still pretty down overall compared to the past, but sentiment is on the rise despite recent drops and big ups and downs along the way.”
