US consumer sentiment dropped in July to its lowest level in eight months as persistent high prices and stubbornly high inflation continued to erode confidence in personal finances.
According to the University of Michigan, the final July sentiment index fell to 66.4 from 68.2 in June. The preliminary reading for the month had been 66, indicating a downward trend in consumer confidence.
Consumer sentiment has been mired at a low level for the past three months, as households’ views of the economy remain extraordinarily negative.
Consumers now expect prices to rise at an annual rate of 2.9 percent over the next year, marking the lowest expectation in four months and slightly down from the 3 percent anticipated in June. Over the next five to ten years, Americans see costs climbing at an average of 3 percent, unchanged from the previous month.
This dip in sentiment reflects the ongoing high cost of living and elevated borrowing costs, leading to pessimistic views and expectations about personal finances. Despite inflation showing signs of cooling, wage gains have been modest, and many Americans have likely exhausted their pandemic-era savings.
“Sentiment has lifted 33 percent above the historic low of June 2022, but it remains guarded as high prices continue to drag down attitudes, particularly for those with lower incomes,” Joanne Hsu, director of the survey, said in a statement.
The current conditions gauge fell to 62.7, its lowest since the end of 2022, and down from July’s preliminary reading of 64.1. The measure of expectations dropped to 68.8, matching the lowest level this year, while an index of the outlook for personal finances plummeted to its lowest since October.
Moreover, buying conditions for durable goods decreased to the lowest since the end of 2022, signaling a lack of confidence in making significant purchases.
Consumers all of political stripes became more negative about current conditions in July but Democrats and Republicans went in opposite directions when it comes to the expectations measure. Democrats become significantly more pessimistic about future economic conditions and Republicans more optimistic. This likely reflects expectations that Trump in July became more likely to win the presidential contest following his debate with Joe Biden. Biden said earlier this week that he was dropping out of the president race and throwing his support behind the candidacy of his vice president, Kamala Harris.
The labor market has softened in recent months, with job openings falling and unemployment climbing from the low of 3.4 percent. Economic growth, which slowed significantly at the start of the year, picked up again this spring. Inflation has declined from the highs of 2022 and 2023 but a report Friday showed it is still higher than it was in January.
As Americans grapple with the inflationary consequences of the Biden-Harris administration’s economic policies, it is clear that the struggle with high prices continues to weigh heavily on consumer sentiment.
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