US consumer sentiment experienced a notable increase in September, reflecting a growing sense of confidence among consumers, as recent data from the University of Michigan's Surveys of Consumers indicates. The primary sentiment gauge surged to 70.1, a robust improvement from the previous month's figure of 67.9, marking a 3.4% increase year-over-year. This uptick in consumer sentiment was observed across various demographics, with gains reported across all education levels and political affiliations.
Notably, all five components of the index rose, propelled by a 6% increase in the one-year business outlook, as emphasized by Joanne Hsu, Director of the Surveys of Consumers. In terms of current economic conditions, the index saw a sequential growth of 3.3%, reaching 63.3 in September. Moreover, the expectations measure rose by 3.2%, hitting 74.4, which suggests a significant uptick in optimism among consumers.
On an annual scale, this expectations measure shows a remarkable 13% increase, signaling a broader sense of positive outlook among individuals. Despite this optimism, it’s important to note that consumer sentiment remains slightly below its historical average, mostly due to ongoing concerns about elevated price levels.
Hsu remarked that consumers are acutely aware of the gradual decline in inflation rates, which could influence their economic outlook. Intriguingly, many consumers revealed that their expectations regarding the economy are closely tied to the outcome of the upcoming US presidential election scheduled for November. In a comparison of partisan sentiments, data suggests that consumers are increasingly expecting a victory for Democratic Party nominee, US Vice President Kamala Harris, whereas nearly two-thirds of Republican individuals continue to believe in a potential triumph for former President Donald Trump, as highlighted by Hsu. In terms of inflation expectations, consumers indicated a slight decrease, with year-ahead inflation expectations dipping to 2.7% in September from the preceding 2.8%.
Conversely, the five-year price growth outlook has risen to 3.1%, up from 3% last month, showcasing a nuanced perspective on inflation trends among consumers. Additional data released by the Bureau of Economic Analysis indicated that US consumer spending exhibited a greater-than-expected easing in August, while the Federal Reserve's key inflation metric experienced year-over-year growth, aligning with Wall Street's expectations..