Americans are feeling better about the economy than they have in almost two years, the University of Michigan’s consumer sentiment survey showed on Friday.
The index of consumer sentiment rose to 72.6 in the preliminary mid-July reading, much better than expected. This was the second straight month of improvement and 13 percent above the June reading.
“All components of the index improved considerably, led by a 19% surge in long-term business conditions and 16% increase in short-run business conditions. Overall, sentiment climbed for all demographic groups except for lower-income consumers,” said Joanne Hsu, the director of the survey.
The sharp rise in sentiment is largely due to the continued slowdown in inflation and ongoing strength in the labor market. On Wall Street, the recent inflation data have revived hopes for a “soft-landing” in which inflation comes down without a significant slump in the economy or financial markets. Some are describing falling inflation and low unemployment as a “Goldilocks” moment for the economy.
Year-ahead inflation expectations inched up from 3.3 percent in June to 3.4 percent in July. This remains far below the high point of 5.4 percent hit in April of last year. Long-run inflation expectations were “virtually unchanged” at 3.1 percent. Long-run expectations have stayed within the narrow 2.9 percent to 3.1 percent range for 23 of the last 24 months.