In a noteworthy development for the US economy, consumer sentiment has surged to its highest level since May, as indicated by the latest preliminary data from the University of Michigan's Surveys of Consumers. The sentiment gauge rose to 69 in September, up from 67.9 in August, surpassing the expected consensus of 68.5 in a survey conducted by Bloomberg.
On a year-over-year basis, this represents an increase of 1.8%. This uptick in sentiment is largely attributed to improved purchasing conditions for durable goods, as consumers perceive more favorable pricing, according to Surveys of Consumers Director, Joanne Hsu. Hsu commented on the current climate, stating, "Sentiment is now approximately 40% above its low in June 2022; however, consumers remain cautious as the upcoming elections generate significant uncertainty." As the US presidential elections approach, scheduled for November, the political landscape is shifting.
Vice President Kamala Harris has emerged as the Democratic nominee following President Joe Biden’s withdrawal from the race in late July, while former President Donald Trump is poised to represent the Republican party. Hsu revealed that a rising number of both Republicans and Democrats now anticipate a Harris victory, an observation made from survey results collected prior to the recent presidential debate. In terms of economic conditions, the index for current economic conditions rose by 2.6% sequentially, reaching 62.9 in September, while the expectations index climbed 1.2% to 73.
This is a promising sign, showcasing a growing confidence among consumers regarding the economic outlook. Additional official data released earlier this week indicated that annual producer prices in the US aligned with expectations for August, and consumer inflation recorded the smallest year-over-year increase since February 2021. Moreover, year-ahead inflation expectations have dropped to 2.7% in September from 2.8% in the previous month, marking the fourth consecutive decline and the lowest reading since December 2020.
"Positive year-ahead expectations regarding personal finances and the overall economy have also seen an improvement, despite a slight softening in views concerning the labor market," added Hsu. Lastly, the five-year price growth outlook has experienced a modest increment, rising to 3.1% this month from 3% in August.
This evolving landscape of consumer sentiment and inflation expectations plays a crucial role in shaping the economic narrative as the nation gears up for the elections ahead..