After five consecutive months of declines, consumer sentiment reversed course this month, rising alongside some positive economic signs of lowered inflation and an all-but-guaranteed rate cut by the Fed in September.
According to the University of Michigan’s latest report published Friday, consumer sentiment rose 1.5 index points in August to 67.9, up from a 66.4 reading in July.
Sentiment currently sits at 36% above the all-time historic low from June 2022. Looking back over this year, sentiment started out strong for consumers, with a large leap in sentiment back in January and another increase in February, but then saw a 0.5% decrease in March, a 1.9% fall in April, a notable 10.5% drop in May, a 1.3% drop in June and a 2.6% fall in July.
While positive economic signs are emerging, overall consumers’ hopes are still in check, with sentiment down 2.2% year-over-year.
Joanne Hsu, director of the Surveys of Consumers at the University of Michigan, explained that August’s reading reflects an improved outlook on the economy as well as a change in election expectations.
“Consumers’ short- and long-run economic outlook improved, with both figures reaching their most favorable levels since April 2024 and a particularly sizable 10% improvement for long-run expectations that was seen across age and income groups,” Hsu stated, adding, “Sentiment this month reflects a slight rise in sentiment among Independents, as Democrats and Republicans offset each other almost perfectly. Democrats exhibited a large 10% increase in sentiment while Republicans posted an equally sized decline.
“These patterns resulted from a sea change in election expectations this month with Harris emerging as the Democratic candidate for president. In July, 51% of consumers expected Trump to win the election versus 37% for Biden. In August, election expectations flipped; 36% expected Trump to win compared with 54% for Harris.”
However, Hsu noted that consumers’ economic and election expectations are subject to change as election day approaches.
The Index of Consumer Expectations for this month is listed at 72.1 index points, which is a 4.8% increase over last month’s 68.8 and a YoY 10.2% increase over the August 2023 reading of 65.4.
Click here to view the full report.
