Consumer sentiment inches up as gasoline prices fall; inflation fears ease

Consumers are feeling a bit better in August.

In preliminary results for August, the University of Michigan’s index of consumer sentiment edged up to 55.1 from a July reading of 51.1 and above the all-time low reading of 50 (adjusted from 50.2) in June. 

Amid continued decline in gasoline prices, consumer expectations for inflation during the next year inched down to 5%, its lowest reading since February but still above the 4.6% reading of a year ago. At the same time, expectations for inflation during the next five years ticked up to 3% in August, from 2.9% in July, which was a six-month low. The share of consumers blaming inflation for eroding their living standards remained near 48%.

The index of consumer expectations rose to 54.9 in July, from 47.3 in July.

“All components of the expectations index improved this month, particularly among low and middle-income consumers for whom inflation is particularly salient,” wrote Joanne Hsu, surveys of consumers director.

The year-ahead economic outlook rose substantially to just above its average reading from the second quarter 2022, Hsu noted. But the two other expectations index components remain at or below their second-quarter averages.

In other findings, high-income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables.