The University of Michigan’s preliminary index of consumer sentiment edged up to 61.8 in July from 60.7 in June, increasing for a second straight month and indicating consumers feel slightly better about the economy and inflation.
This is the index’s highest level since February but still reflects historically low levels of optimism. Consumer sentiment has fallen by 6.9 percent (4.6 points) compared to a year ago and is down 16 percent from December.
In other metrics, the index for current economic conditions rose to 66.8 in July from 64.8 the previous months, and the index of consumer expectations inched up to 58.6 from 58.1.
Joanne Hsu, the director of surveys, commented, “Consumer sentiment was little changed from June, inching up about one index point to 61.8. While sentiment reached its highest value in five months, it remains a substantial 16 percent below December 2024 and is well below its historical average. Short-run business conditions improved about 8 percent, whereas expected personal finances fell back about 4 percent. Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future. At this time, the interviews reveal little evidence that other policy developments, including the recent passage of the tax and spending bill, moved the needle much on consumer sentiment.
“Year-ahead inflation expectations fell for a second straight month, plunging from 5.0 percent last month to 4.4 percent this month. Long-run inflation expectations receded for the third consecutive month, falling back from 4.0 percent in June to 3.6 percent in July. Both readings are the lowest since February 2025 but remain above December 2024, indicating that consumers still perceive substantial risk that inflation will increase in the future.”
