A report from
the University of Michigan revealed on Friday that the preliminary reading for
the Reuters/Michigan index of consumer sentiment increased 1.8 per cent m-o-m
to 61.8 in early July. This was the highest reading since February (64.7).
Economists had predicted
the index would improve to 61.5 this month from the June final reading
of 60.7.
According to
the report, the index of current economic conditions surged 3.1 per cent m-o-m to 66.8 in July (the highest
level since January (74.0)), while the index of consumer expectations went up
0.9 per cent m-o-m to 58.6 (the highest level since February (64.0)).
The report also
revealed that the estimates of year-ahead expected inflation fell from 5.0 per
cent in June to 4.4 per cent
early this month, the lowest since February (4.3 per cent). At the same time, the 5-year expected inflation dropped
from 4.0 per cent to 3.6
per cent, also the lowest since February (3.5 per cent).
Commenting on
the latest findings, Surveys of
Consumers Director Joanne Hsu said that the July small increase in sentiment suggests
that 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 stabilises for the foreseeable future. “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,” she added.
Hsu also noted
that the measures of year-ahead inflation expectations and long-run inflation
expectations remain above December 2024, indicating that consumers still
perceive substantial risk that inflation will increase in the future.