The University of Michigan’s Index of Consumer Sentiment rose to 67.8 in a preliminary August reading, up from 66.4 in the prior month, marking the first increase since June.
Consumers’ views on current economic conditions fell to 60.9 in August from 62.7 in the prior month. But the index on expectations about the future rose to 72.1 — the highest level since April — from 68.8.
Presidential election developments were a major driver of the August survey, according to Joanne Hsu, director, Surveys of Consumers. Sentiment for Democrats rose 6% as Vice President Kamala Harris gained ground in the wake of replacing Joe Biden as the Democratic nominee for president. Sentiment for Republicans fell 5%.
“Overall, expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months, consistent with the fact that election developments can influence future expectations but are unlikely to alter current assessments,” Hsu said.
Year-ahead inflation expectations came in at 2.9% for the second straight month. These expectations ranged between 2.3 to 3.0% in the two years prior to the pandemic.
Long-run inflation expectations came in at 3.0%, unchanged from the last five months. These expectations remain somewhat elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic.
The survey showed that 41% of consumers believe Harris is the better candidate for the economy, while 38% said Trump is better.
“Survey responses generally incorporate who, at the moment, consumers expect the next president will be,” said Hue, who noted that 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.