News Summary

Consumer sentiment in the U.S. rose by 1.8% in July 2023, reaching its highest level since February. The improvement indicates a more positive outlook on the economy, driven by decreasing inflation expectations and resilient retail spending. However, concerns about inflation persist as consumers remain cautious. Overall, the findings suggest a gradual stabilization in consumer confidence, shaped by recent economic trends and policy shifts.

Ann Arbor, Michigan – Consumer sentiment improved by 1.8% from June to July 2023, reaching a score of 61.8, the highest it has been since February. The latest data aligns with the consensus estimates provided by Dow Jones, indicating a modest but positive shift in consumer attitudes toward the economy.

The recent survey results indicate that both current conditions and future expectations increased over the previous month. Consumers’ projections for one-year inflation dropped to 4.4%, down from 5% in June and significantly lower than the 6.6% recorded in May, which was the highest since late 1981. Similarly, the outlook for five-year inflation declined by 0.4 percentage points to 3.6%, marking the lowest expectations since February 2025.

Despite these positive developments, concerns regarding inflation persist. The one-year and five-year inflation forecasts still exceed levels seen in December 2024, indicating that consumers remain vigilant about potential price increases. Joanne Hsu, the survey director, highlighted that participants continue to perceive substantial risks associated with inflation rising in the future.

Comparing year-over-year data, the overall consumer sentiment index has decreased by 6.9%, while the index has dropped 16% since December 2022. The expectations reading specifically is down 14.8% compared to last July, while the current conditions index saw a 6.5% increase, showcasing contrasting trends between short-term and long-term consumer outlooks.

Economist Jeffrey Roach from LPL Financial noted that consumers generally expect inflation driven by tariffs to be temporary, with conditions likely to improve by 2026. Sentiment around tariffs has predominantly been influenced by actions taken during the Trump administration, which imposed a 10% tariff alongside reciprocal duties. Recent individual product tariffs have brought renewed inflation concerns, but overall consumer perceptions appear to be stabilizing.

Positive underlying economic indicators support this improved consumer sentiment. Retail spending rose in June, suggesting that consumer spending remains resilient in the face of economic challenges. Also, recent business sentiment surveys indicate a corresponding improvement in attitudes among businesses, further contributing to a more optimistic consumer outlook. Stocks have seen gains, bolstering consumer confidence despite the looming uncertainties tied to tariff policies and possible import price increases from countries like Mexico, Canada, and those within the European Union.

The findings of this survey reveal a gradual reduction of tariff-induced inflation fears, as consumers grow more confident about the broader economy. These shifts may reflect an evolving landscape in consumer expectations, driven by real-time economic performance and potential future policy shifts.

In summary, consumer sentiment in the United States has demonstrated a slight but significant uptick in July, reflecting a complex interplay of factors including inflation expectations, retail spending trends, and the broader economic climate. Continued monitoring of these trends is essential as policymakers, businesses, and consumers navigate the unfolding economic landscape.