WASHINGTON – Consumer sentiment in the U.S. rose for the first time in five months in early August as consumers felt more optimistic about their finances amid stable inflation.
According to the University of Michigan’s preliminary August reading, the sentiment index rose from 66.4 in July to 67.8. The median reading in a Bloomberg survey of economists was 66.9.
Data on Friday showed that consumers expect prices to rise 2.9 percent annually next year, unchanged from the previous month, and expect costs to rise 3 percent over the next five to 10 years.
The upturn in sentiment was partly due to President Joe Biden’s decision not to seek re-election, which he announced in late July. Confidence among Democrats recovered after Vice President Kamala Harris stepped in as the party’s nominee.
“Consumer expectations may change as the presidential election campaign comes into greater focus, even as consumers expect inflation – still their biggest concern – to continue to stabilize,” Joanne Hsu, director of the survey, said in a statement.
The poll showed that more consumers believe Harris would do a better job on economic policy. Before Biden’s decision, Republican candidate Donald Trump was well ahead of him in polls on this issue.
Despite the recent rebound, sentiment remains subdued due to higher living costs, lower hiring rates and increased borrowing costs. While private demand remains stable, consumers are increasingly relying on credit cards and dipping into savings to cover their expenses.
The report showed that purchase plans for durable goods fell to their lowest level since the end of 2022.
Nevertheless, expectations for the labor market remained stable. Only 35 percent of respondents said they expected the unemployment rate to rise in the coming year. The proportion of consumers who expect interest rates to fall in the coming year has increased significantly.
The consumer expectations index rose to a four-month high of 72.1 in August. The current situation indicator fell for the fifth consecutive month.
