Consumers continued to keep their economic hopes in check in July, as sentiment readings continue to slowly decrease.
Consumer sentiment fell 2.6% in July, from 68.2 in June to 66.4, according to the University of Michigan’s latest report. This is the fifth straight month of decreases, with a 0.5% decrease in March, a 1.9% fall in April, an astounding 10.5% drop in May—the lowest reported reading in five months—and a 1.3% drop in June.
This year had originally started out strong for consumers, with a large leap in sentiment back in January and another increase in February. However, some mixed economic signs have held consumers’ hopes back, bringing sentiment down 7.1% year-over-year.
Joanne Hsu, director of the Surveys of Consumers at University of Michigan, however, explained that July’s reading may be within the margin of error and not actually cause for further concern, similar to past readings.
“Sentiment has lifted 33% above the June 2022 historic low, but it remains guarded as high prices continue to drag down attitudes, particularly for those with lower incomes,” said Hsu. “Labor market expectations remain relatively stable, providing continued support to consumer spending. However, continued election uncertainty is likely to generate volatility in economic attitudes in the months ahead.”
Year-ahead inflation expectations fell for the second straight month, from 3% last month to 2.9% this month, now just inside the 2.3% – 3% range seen in the two years prior to the pandemic. Long-run inflation expectations came in at 3% for the fourth consecutive month, still somewhat elevated relative to the 2.2% – 2.6% range seen in the two years pre-pandemic.
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