Consumer sentiment in the U.S. has improved by much more than expected in the month of August, according to preliminary data released by the University of Michigan on Friday.
The report showed the consumer sentiment index jumped to 55.1 in August from 51.5 in July. Economists had expected the index to inch up to 52.5.
With the bigger than expected increase, the consumer sentiment index continued to recover after hitting a record low 50.0 in June.
The extended rebound by the headline index reflected a significant improvement in consumer expectations, with the index of consumer expectations surging to 54.9 in August from 47.3 in July.
“All components of the expectations index improved this month, particularly among low and middle income consumers for whom inflation is particularly salient,” said Surveys of Consumers Director Joanne Hsu.
She added, “The year-ahead economic outlook rose substantially to just above its average reading from the second quarter 2022, while the two other expectations index components remain at or below their second quarter averages.”
Meanwhile, the report showed a pullback by the current economic conditions index, which fell to 55.5 in August after climbing to 58.1 in July.
The University of Michigan also said one-year inflation expectations dipped to 5.0 percent in August from 5.2 percent in July, while five-year inflation expectations crept up 3.0 percent from 2.9 percent.
Hsu noted one-year inflation expectations fell to the lowest level since February but were still well above the 4.6 percent reading from a year ago.
“Uncertainty over long run inflation receded a bit, with the interquartile range in expectations falling from 4.7 last month to 3.8 this month, remaining above the 3.3 range seen last August,” Hsu added. “Still, the share of consumers blaming inflation for eroding their living standards remained near 48%.”
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