In August, US consumer sentiment experienced a notable rise, significantly exceeding projections, while inflation expectations remained steady. Preliminary results from a survey conducted by the University of Michigan's Surveys of Consumers revealed that the key sentiment gauge rose to 67.8 this month from a previous reading of 66.4 in July.
Analysts had anticipated a more modest increase to 66.9, as indicated by a survey compiled by Bloomberg. On a year-over-year basis, however, the measure reflects a decrease of 2.3%. Notably, the political landscape has shifted, with US President Joe Biden announcing his decision to withdraw from the presidential race and endorsing Vice President Kamala Harris as the Democratic Party's nominee.
This political realignment has had a measurable impact on consumer sentiment, particularly among Democrats. The survey results indicated a 6% increase in sentiment for Democrats, contrasted by a 5% decline for Republicans, as noted by Surveys of Consumers Director Joanne Hsu. Among consumers surveyed, 41% expressed a belief that Harris would be the stronger candidate for the economy, while 38% favored former President Donald Trump.
Hsu highlighted a notable shift from the previous months, where Trump maintained a five-point advantage over Biden regarding economic perceptions. The overall expectations of consumers improved not only for personal financial situations but also for a five-year economic outlook, reaching its highest level in four months.
Despite these positive sentiments, the index for current economic conditions registered a sequential decrease of 2.9%, settling at 60.9 for August. Conversely, the expectations measure saw a rise of 4.8%, climbing to 72.1. Year-ahead inflation expectations did not see any change, remaining at 2.9%, while the five-year price growth outlook has stabilized at 3% for the fifth consecutive month.
Hsu cautioned that consumer expectations are inherently subject to fluctuations. "Some consumers note that if their election expectations do not come to pass, their expected trajectory of the economy would be entirely different," she stated. As the presidential campaign intensifies, the interplay between political developments and economic expectations will likely influence consumer sentiment in the coming months, especially as inflation remains the foremost concern among consumers, which they anticipate will continue to stabilize..