The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary July reading of 72.6 from a June reading of 64.4. It is the largest gain since December 2005. Sentiment is at its highest level since September 2021.
Economists polled by the Wall Street Journal had expected a June reading of 65.5.
However, Americans’ expectations for overall inflation over the next year rose to 3.4% in July from 3.3% in the prior month. Expectations for inflation over the next 5 years ticked up to 3.1% from 3% in June.
Key details: According to the UMich report, a gauge of consumers’ views on current conditions jumped to 77.5 in July from 69 in the prior month, while a barometer of their expectations rose to 69.4 from 61.5.
Big picture: Sentiment is improving as gasoline prices have held steady this summer. Low unemployment is also playing a role.
What are they saying? “The good news is that sentiment has roughly retraced half of its fall from pre-pandemic levels. For most Americans, a modest gain in income is expected. Still, durable goods buying conditions remain far off their recent levels. The rise in confidence seems restrained, and clouds concern about the forecasted economic downturn which continues to linger,” said Scott Murray, economist at Nationwide, in a note to clients.