University of Michigan Final Consumer Sentiment Index Rises for August 2022

The University of Michigan today (8-26-22) released its final Consumer Sentiment Index (CSI) for August. The Index of Consumer Sentiment increased to a reading of 58.2 in August, up from its reading of 51.5 in July. This is a month-over-month increase of 13.0% but down 17.2% year-over-year (70.3 in August 2021).

The Current Economic Conditions index declined to a reading of 58.6 in August, up from a reading of 58.1 in July. This is a month-over-month increase of 0.9% but down 25.4% year-over-year (78.5 in August 2021).

Finally, the Index of Consumer Expectations increased to a reading of 58.0 in August, up from 47.3 in July. This is a month-over-month increase of 22.6% but down 10.9% year-over-year (65.1 in August 2021).

In remarks and analysis prepared to accompany the release of the CSI, Joanne Hsu, Director of Surveys for the University of Michigan, said:

“The final August reading continued the early month improvement in consumer sentiment, rising 13.0% above July but remaining 17% below a year ago. Most of this increase was concentrated in expectations, with a 59% surge in the year-ahead outlook for the economy following two months at its lowest reading since the Great Recession. In addition, personal financial expectations rose 12% since July. The gains in sentiment were seen across age, education, income, region, and political affiliation, and can be attributed to the recent deceleration in inflation. Lower-income consumers, who have fewer resources to buffer against inflation, posted particularly large gains on all index components. Their sentiment now even exceeds that of higher-income consumers when it typically lags higher-income sentiment by over 15 points. Hopefully this tentative improvement will continue, as overall sentiment remains extremely low by historical standards.

The relative relief felt by consumers reflected in their inflation expectations. The median expected year-ahead inflation rate was 4.8%, down from 5.2% last month and its lowest reading in 8 months. Uncertainty over expectations rose considerably, particularly among lower-educated consumers. Long-run expectations came in at 2.9%, remaining within the 2.9-3.1% range seen in the past year.”