University of Michigan Reports Preliminary Results of Its Consumer Sentiment Index for August

On Friday, the University of Michigan released the preliminary results of its Surveys of Consumers for August.

• The Index of Consumer Sentiment rose to a reading of 67.8 in August, up from 66.4 in July. This is a month-over-month increase of 2.1% but down 2.3% year-over-year (69.4 in August 2023).
• Current Economic Conditions dropped to a reading of 60.9 in August, down from 62.7 in July. This is a month-over-month decline of 2.9% and down 19.3% year-over-year (75.5 in August 2023).
• The Index of Consumer Expectations climbed to a reading of 72.1 in August, up from 68.8 in July. This is a month-over-month increase of 4.8% and up 10.2% year-over-year (65.4 in August 2023).

In background and analysis accompanying the report, University of Michigan Surveys of Consumers Director Joanne Hsu said,

“Consumer sentiment was essentially unchanged for the fourth consecutive month, inching up 1.4 index points. With election developments dominating headlines this month, sentiment for Democrats climbed 6% in the wake of Harris replacing Biden as the Democratic nominee for president. For Republicans, sentiment moved in the opposite direction, falling 5% this month. Sentiment of Independents, who remain in the middle, rose 3%. The survey shows that 41% of consumers believe that Harris is the better candidate for the economy, while 38% chose Trump. In comparison, between May and July, Trump had a 5-point advantage over Biden on the economy. Overall, expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months, consistent with the fact that election developments can influence future expectations but are unlikely to alter current assessments. Survey responses generally incorporate who, at the moment, consumers expect the next president will be. Some consumers note that if their election expectations do not come to pass, their expected trajectory of the economy would be entirely different. Hence, consumer expectations are subject to change as the presidential campaign comes into greater focus, even as consumers expect that inflation-still their top concern-will continue stabilizing.

Year-ahead inflation expectations came in at 2.9% for the second straight month. These expectations ranged between 2.3 to 3.0% in the two years prior to the pandemic. Long-run inflation expectations came in at 3.0%, unchanged from that last five months. These expectations remain somewhat elevated relative to the 2.2–2.6% range seen in the two years pre-pandemic.”