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U.S. consumer sentiment unexpectedly declined to the lowest level in eight months in early July as high prices continued to weigh on Americans\u2019 views of their finances and the economy.<\/p>\n
The sentiment index fell to 66 in July from 68.2, according to the preliminary reading from the University of Michigan. The median estimate in a Bloomberg survey of economists called for a slight increase to 68.5.<\/p>\n
Consumers\u2019 expectations for inflation over the next year fell for a second month, to 2.9%, data Friday showed. They saw costs rising at an annual rate of 2.9% over the next 5 to 10 years, also edging down from the prior month.<\/p>\n
The University of Michigan also released a special report on inflation expectations, a point of recent concern among economists. It found the divergence between average and median long-run expectations was driven by a small number of consumers and \u201cunlikely to reflect a fundamental deterioration in consumers\u2019 inflation expectations.\u201d<\/p>\n
Data earlier this week showed\u00a0inflation cooled<\/a>\u00a0broadly in June, with a measure of underlying price trends posting its smallest advance since 2021. That bolstered the case for the Federal Reserve to cut interests rates in coming months.<\/p>\n The data also provided some welcome relief to consumers who felt squeezed by the post-Covid spike in inflation. Goods prices have led the way, actually declining over most of the past year.<\/p>\n At the same time, the labor market, which has powered consumer spending, has showed signs of cooling, a trend that could help dampen sentiment if it continues. Unemployment rose to 4.1% in June, its highest mark since late 2021.<\/p>\n \u201cDespite expecting inflation to ease, consumers remain vociferously frustrated at the persistence of high prices,\u201d Joanne Hsu, director of the survey, said in a statement. \u201cAlmost half of consumers spontaneously expressed complaints that high prices are eroding their living standards, matching the all-time high reached two years ago.\u201d<\/p>\n The current conditions gauge fell to 64.1 from 65.9, its lowest since December 2022. A measure of expectations also declined to 67.2, an eight-month low, from 69.6 in June.<\/p>\n Buying conditions for durable goods dropped to 85, the lowest in just over a year. Consumers\u2019 perception of their financial situation now and in the future deteriorated in July, with each falling to the lowest level since October.<\/p>\n The report noted the November presidential election may be weighing on consumers\u2019 expectations for the economy.<\/p>\n \u201cWith the upcoming election, consumers perceived substantial uncertainty in the trajectory of the economy, though there is little evidence that the first presidential debate altered their economic views,\u201d Hsu said.<\/p>\n<\/div>\nElection Worries<\/h2>\n
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