Consumer Sentiment Continues to Rebound from Record Low
August 11, 2022
U.S. consumer sentiment hit a three-month high in early August as it continues its climb from a record low earlier this summer.
The preliminary August reading of the University of Michigan’s consumer sentiment index, which surveys consumers about their attitudes on the state of the economy, climbed 3.6 points to 55.1 from a July reading of 51.5. Consumer sentiment has increased since falling to 50 in June, the lowest reading on record since the index was created in 1952.
Inflation continues to weigh heavily on consumer sentiment, with nearly half, 48%, of those surveyed blaming higher costs for eroding their living standards.
Consumers’ inflation expectations for the future were mixed, with consumers increasing their longer-term views for prices slightly, but reducing their year-ahead outlook for costs. Consumers expect prices to climb at an annual rate of 3% over the next five to 10 years, a slight increase from 2.9% in July. They see costs rising 5% over the next year, the lowest since February, compared to last month’s 5.2%.
The index’s topline gain was driven solely by a pickup in consumers’ forward outlook. The portion of the index that gauges future expectations increased to a three-month high of 54.9 from 47.3 in July. At the same time, the gauge of current conditions fell to 55.5 from 58.1.
Despite low levels of sentiment, households have maintained robust spending. Retail sales rose 1% in June as consumers weathered higher prices. Economists expect that the disconnect between sentiment and spending to resolve at some point, with many expecting a slowdown in spending to reflect consumers’ pessimistic outlook.