Consumer Sentiment Rises in July Despite Lingering Inflation Concerns

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Consumer sentiment on the economy reached its highest value in five months, but still fell behind December 2024 levels as consumers struggle to shake off long-term inflation concerns, a survey released Friday found. 

Sentiment rose 1.8% in July to an index of 61.8 from Junes 60.7 , marking its highest value since February, according to preliminary data from the University of Michigans Survey of Consumers for July. But, compared to the same month's data in 2024, the survey found that consumer sentiment has dropped 6.9%. 

Even with a better outlook than previous months, consumer sentiment is still a "substantial" 16% below December 2024 value and is well below its historical average. Plus, sentiment among high-wealth consumers is down 17% since December 2024, the survey found.  

Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future,  Surveys of Consumers Director Joanne Hsu said in the release. At this time, the interviews reveal little evidence that other policy developments, including the recent passage of the tax and spending bill, moved the needle much on consumer sentiment.

Since taking office in January when consumer sentiment was at an index of 71.7 President Donald Trump has declared a trade war on countries around the world that has seemingly geneerated more fear among consumers of even higher prices, but now they seem to be reporting feeling a little less concerned about inflation.

Year-ahead inflation expectations fell for a second straight month, plunging from 5.0% last month to 4.4% this month. Long-run inflation expectations receded for the third consecutive month, falling back from 4.0% in June to 3.6% in July, Hsu said. 

However, Hsu noted that although these numbers are the lowest theyve been since February, they are still sitting above December 2024 levels, indicating that consumers still perceive substantial risk that inflation will increase in the future. 

The Survey of Consumers is a national poll conducted for the last 79 years, focusing on three areas: consumers own financial situation, their short-term views, and long-term views on the economys overall prospects.

- Michael Barclay contributed to this article.