US July Consumer Confidence Rises to 5-Month High, Inflation Expectations Slightly Cool

According to foreign media reports on Friday (31st), US consumer confidence rose to a five-month high in July, as perceptions of the economic outlook improved and gasoline prices temporarily retreated from wartime highs, pushing the final reading of the University of Michigan's consumer sentiment index up to 55.2—higher than the preliminary 54.4, June’s 49.5, and exceeding the 54.0 forecast by economists surveyed by Reuters.

This survey was conducted between June 23 and July 27. During this period, US gasoline prices briefly dropped to their lowest since March, but with renewed escalation in Middle East tensions, the average price per gallon surpassed $4 again. Despite the rebound in energy prices, consumer confidence broadly improved.

Joanne Hsu, director of the University of Michigan Surveys of Consumers, stated that confidence rose across respondents of different income levels, education, wealth, age, and political affiliations. Consumers continue to focus on immediate economic concerns such as purchasing power, while geopolitical or military situations have taken a secondary role.

However, despite recent improvements, consumer confidence remains 11% lower than a year ago, reflecting relatively pessimistic views toward the overall economy. High prices continue to pressure household budgets, yet data released earlier this week showed American households have not stopped spending—real (inflation-adjusted) consumer spending rose 0.4% in June, matching the largest gain in nearly a year.

The survey revealed both the current conditions index and the expectations index increased from June. Notably, expectations for business conditions over the next five years reached a one-year high. The indicator measuring durable goods purchase conditions climbed to its highest since October last year, suggesting improved willingness among households to buy big-ticket items like cars and appliances.

Inflation expectations cooled slightly. Consumers anticipate prices will rise 4.2% over the next year, down from 4.6% in June, but still significantly higher than the 3.4% recorded in February before the US-Iran conflict escalated, and above all 2024 readings. Long-term inflation expectations for the next 5 to 10 years remained steady at 3.3%, slightly above the 2.8% to 3.2% range seen throughout 2024.

Inflation expectations cool slightly. (Image: ZeroHedge)

Artificial Intelligence (AI) also emerged as a significant factor influencing consumer sentiment for the first time. Joanne Hsu noted that overall public commentary on AI was negative—while some acknowledged AI’s productivity benefits, many more expressed concern that the technology could disrupt the job market.

(Image: ZeroHedge)