Consumer optimism is climbing even as sentiment numbers remain far lower than last year, according to the University of Michigan’s Surveys of Consumers report.
Consumer sentiment increased 13 percent in August — from 51 to 58 — but remains 17 percent below year-ago levels, according to the University of Michigan. Most of the improvement came in expectations, with a nearly 60 percent surge in the year-ahead economic outlook from 47 to 58. The index for current economic conditions remained at 58. Personal financial expectations jumped 12 percent since July.
“The gains in sentiment were seen across age, education, income, region, and political affiliation, and can be attributed to the recent deceleration in inflation,” wrote Surveys of Consumers Director Joanne Hsu. “Lower-income consumers, who have fewer resources to buffer against inflation, posted particularly large gains on all index components. Their sentiment now even exceeds that of higher-income consumers, when it typically lags higher-income sentiments by over 15 points. Hopefully this tentative improvement will continue, as overall sentiment remains extremely low by historical standards.”
The median expected year-ahead inflation rate was 4.8 percent, a drop from 5.2 percent in July and its lowest reading in eight months. The Consumer Price Index increased 8.5 percent in July from the year prior, which, although lower than the 9.1 percent increase in June, was still historically high.