U.S. Consumer Sentiment Declines in July as Inflation Worries Continue to Grow

The University of Michigan today (7-30-21) released its second and final reading of Consumer Sentiment for July. According to the survey, U.S. consumer sentiment fell to a five-month low in July amid lingering concerns about inflation. The University of Michigan’s Consumer Sentiment Index (MCSI) fell to a final reading of 81.2, the lowest level since February, from June’s final level of 85.5. The final reading for July, however, was above the July preliminary reading of 80.8 and above the median forecast of 80.8 among economists polled by Reuters.

The survey’s barometer of current economic conditions fell to 84.5, the lowest since August 2020, from June’s 88.6 reading. This was also in line with July’s preliminary reading of 84.5. The survey’s gauge of consumer expectations declined to 79.0 in July from June’s 83.5, but up from the mid-month reading of 78.4. The survey’s one-year inflation expectation rose to 4.7%, the highest level since August 2008, from 4.2% in June, while the survey’s five-year inflation outlook was unchanged at 2.8%.

In a statement prepared for the release of the MCSI, Richard Curtin, the survey director said, “While most consumers still expect inflation to be transitory, there is growing evidence that an inflation storm is likely to develop on the not-too-distant horizon. The improved finances of consumers have greatly reduced consumers’ resistance to price increases.”