With a recent interest rate decrease from the Fed and slowing inflation, consumers’ economic hopes saw a significant increase in September.
Consumer sentiment rose 3.2% in September, from 67.9 in August to 70.1, according to the University of Michigan’s latest report. This is the second consecutive month of increase, following August’s rise of 1.5 points, the first in five months.
This year had originally started out strong for consumers, with a large leap in sentiment back in January and another increase in February. While the spring and summer seasons brought a string of decreases, sentiment has now turned course and risen 3.4% year-over-year.
Joanne Hsu, director of the Surveys of Consumers at University of Michigan, explained that while sentiment remains down historically due to “frustration over high prices,” consumers are now “fully aware that inflation has continued to slow.”
Unsurprisingly, consumers are much more likely to move forward with big purchases (like a home) when they are feeling positive about the economy, though there are many other factors involved in those decisions, with Hsu saying that many people are still anxiously eying Election Day.
“Sentiment appears to be building some momentum as consumers’ expectations for the economy brighten,” she continued. “At the same time, many consumers continue to report that their expectations hinge on the results of the upcoming election. Relative to August, consumers across political parties are increasingly expecting a Harris presidency, though about two-thirds of Republicans still expect Trump to win.”
Consumers’ view of current economic conditions grew 3.3%, from 61.3 in August to 63.3, but is down 11% year-over-year. The index of consumer expectations rose 3.2%, from 72.1 to 74.4, and grew 13% year-over-year. Hsu noted that this “reflects greater optimism across a broad swath of the population.” Hsu also added that all five components are up, led by a “6% surge in one-year business expectations.”
For the full report, click here.
