Consumer sentiment in the U.S. is improving as people’s worst fears about tariff-induced inflation and an economic slowdown continue to decline.
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The latest “Survey of Consumers” from the University of Michigan has found that overall sentiment in July increased 1.8% from June to 61.8, which is in line with the consensus estimate of economists and at its highest level since February of this year when President Donald Trump began promoting his tariff agenda.
On inflation, which has been one of the biggest worries, the outlook at the one- and five-year horizons both fell in July, dropping to their lowest levels since February. The one-year inflation outlook declined to 4.4%, down from 5% in June and well off the 6.6% peak seen in May of this year. For the five-year outlook, the expectation slid to 3.6%, down 0.4 percentage points from June.
Less Gloomy
Consumers’ outlook has improved dramatically from April and May of this year, when pessimism was at its highest reading since 1981. Americans were extremely concerned about the economy after President Trump made his “Liberation Day” tariff announcement on April 2.
However, while the outlook among consumers is less gloomy than it had been a few months ago, current readings are not as good as they were in December 2024 before President Trump returned to the White House. In a statement, the University of Michigan cautioned that “consumers still perceive substantial risk that inflation will increase in the future.”
Still, an improving outlook bodes well for the U.S. as consumer spending accounts for approximately 70% of the economy.
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