Consumer Sentiment Soars as Inflation Retreats

Consumer sentiment jumped 13% in July, hitting a high not reached since September 2021, as inflation recedes and the labor market remains strong.

The University of Michigan's Consumer Sentiment Index for July rose to 72.6% from 64.4% in June. The economic outlook for the year ahead surged 33.4% over last month, with long-run expectations rising 46.7%. 

"The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets," the university's report said.

The trend was also apparent in the Conference Board's Consumer Confidence Index for June, which rose to 109.7, up from 102.5 in May. The index measures consumer attitudes and plans on spending, vacations as well as their expectations for inflation, the stock market and interest rates.

A steady drop in inflation is raising consumers' moods. Inflation is now at 3%, according to the latest reading on the Consumer Price Index, down substantially from its peak of 9.1% in June 2022.

Expectations for inflation in the year ahead were higher than where the CPI is currently trending, ticking up from 3.3% in June to 3.4% in July. Long-run inflation expectations were also virtually unchanged from June at 3.1%.