Consumer sentiment rises but high prices remain big concern
Consumer sentiment rose in July for the second straight month, but remained 11% below a year ago.
The University of Michigan’s Consumer Sentiment Index rose to 55.2 in July, up from 49.5 in June but below last July's 61.7. The Current Index rose to 54.8, up from 47.7 in June and below last July's 68.0. The Expectations Index rose to 55.4, up from 50.7 in June and below last July's 57.7.
Despite recent gains, consumers still have a generally downbeat view of the economy amid five years of elevated inflation and persistent high prices.
"Despite this month's improvement in sentiment, consumers do not feel like they are thriving in the current economy," said University of Michigan economist Joanne Hsu, director of the surveys. "While consumers certainly appreciate that gasoline prices remain below the highs seen in May 2026, the continuation of shipping constraints in the Middle East may make it challenging to sustain any upward momentum in confidence.”
High Prices
High prices continue to be one of the most important factors influencing consumer views of the economy. Spontaneous mentions of high prices eroding personal finances did decline a touch from 56% of consumers last month to 50% in July, likely due to the fact that gas prices remain lower than their May high.
Mentions of high prices remain well above the 46% seen in February prior to the Iran conflict and 39% a year ago.
"High prices are, by far, the top factor for personal finances cited by consumers and felt most acutely by those with lower incomes," Hsu said.
AI
Emerging concerns about artificial intelligence has become another key factor influencing consumers' views of the economy. For three consecutive months, at least 10% of consumers spontaneously mentioned AI at some point during the interviews, gradually increasing from less than 1% in January of 2025.
Most AI mentions were in the context of news heard about the economy, with a mix of consumers citing AI's positive potential for driving gains in productivity and the stock market, and negative potential for driving job loss. Other consumers cite concerns that data centers may drive up local electricity prices.
"On balance, negative comments on AI outweigh positive comments," Hsu said. "Still, at this time, AI is far less important for consumer views of the economy than gasoline prices, mentioned by nearly one-third of consumers, generally in the context of consumers’ direct personal experiences."
The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by web.
