Consumer Sentiment Improves Slightly in July, Inflation Expectations Rise

Consumer sentiment in the US improved slightly in July, reaching 61.7, compared to the prior estimate of 61.8 and 60.7 in June, according to the University of Michigan. Year-ahead inflation expectations rose to 4.5%, up from 4.4% in the previous print and 5.0% in June.

US consumer sentiment showed a modest improvement in July, reaching 61.7, compared to the prior estimate of 61.8 and 60.7 in June, according to the University of Michigan [2]. This uptick, while slight, indicates a stabilization in consumer confidence following a period of decline.

The University of Michigan's Consumer Sentiment Index, which measures consumers' attitudes and confidence in the economy, business conditions, and labor market, rose slightly. Year-ahead inflation expectations also increased to 4.5%, up from 4.4% in the previous print and 5.0% in June [2]. This suggests that consumers are becoming more optimistic about the economic outlook, albeit with some caution.

The current economic conditions index rose to a six-month high of 68.0, while the expectations index slipped to 57.7 [2]. This indicates that consumers are more positive about current conditions but remain cautious about future prospects.

The Conference Board's Consumer Confidence Index® also saw a modest increase in July, rising 2.0 points to 97.2 [1]. This marks the index's second gain in three months, suggesting a recent stabilization in consumer confidence, albeit at a subdued level. The Present Situation Index fell 1.5 points to 131.5, while the Expectations Index rose 4.5 points to 74.4. Notably, a level of 80 or below for the Expectations Index historically signals a recession within the next year [1].

Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board, noted that consumer confidence has stabilized since May, rebounding from April’s plunge, but remains below last year’s heady levels [1]. The Conference Board’s survey found that consumers were less pessimistic about future business conditions and employment, and more optimistic about future income, despite a weakening assessment of current job availability [1].

The slight improvement in consumer sentiment is likely influenced by several factors, including a stock-market rally and recent tariff agreements with major partners such as Japan and the European Union [2]. However, consumers remain concerned about high prices and inflation, with tariffs and the recent budget reconciliation legislation passed by Congress also being topics of discussion [1].

In summary, while consumer sentiment in the US improved slightly in July, it remains a mixed picture with consumers becoming more optimistic about current conditions but cautious about the future. The stabilization in consumer confidence suggests a potential bottoming out of pessimism, which could support economic growth in the coming months.

References:
[1] https://www.advisorperspectives.com/dshort/updates/2025/07/29/consumer-confidence-improves-slightly-in-july
[2] https://www.bloomberg.com/news/articles/2025-08-01/us-consumer-sentiment-rises-to-five-month-high-on-stocks-rally