US consumer sentiment increases for first time in 5 months
WASHINGTON – U.S. consumer sentiment rose in early August for the first time in five months on more optimistic expectations about their finances as inflation steadied.
The sentiment index climbed to 67.8 from 66.4 in July, according to the preliminary August reading from the University of Michigan. The median estimate in a Bloomberg survey of economists called for 66.9.
Consumers expect prices will climb at an annual rate of 2.9% over the next year, unchanged from the prior month, data Friday showed. They see costs rising 3% over the next five to 10 years.
The rise in sentiment was partially driven by President Joe Biden’s decision not to seek re-election, which he announced later in July. Confidence rebounded among Democrats after Vice President Kamala Harris stepped in as the party nominee.
“Consumer expectations are subject to change as the presidential campaign comes into greater focus, even as consumers expect that inflation – still their top concern – will continue stabilizing,” Joanne Hsu, director of the survey, said in a statement.
The survey showed more consumers believe Harris would do a better job on the economy. Before Biden’s decision, Republican nominee Donald Trump had been polling well ahead of him on that issue.
Even with the latest pickup, sentiment remains restrained by a higher cost of living, cooler hiring and elevated borrowing costs. While household demand remains resilient, consumers are increasingly turning to credit cards and resorting to savings to support their spending.
The report showed a measure of buying plans for durable goods slipped to the lowest level since the end of 2022.
Still, labor market expectations remained stable. Just 35% of respondents said they expect the unemployment rate to rise in the coming year. The share of consumers who expect interest rates to decline in the next year rose significantly.
The consumer expectations index rose to a four-month high of 72.1 in August. The current conditions gauge slipped for a fifth month.