Background on the Consumer Confidence Index
The University of Michigan’s Consumer Sentiment Survey reported over the weekend that its Consumer Confidence Index increased from 60.7 points in June to 61.8 in July, marking its highest level in five months according to the preliminary reading of the index compiled by Michigan University. Economists surveyed by Reuters had predicted an increase to 61.5 points.
Key Metrics and Their Changes
- Index of Current Conditions: This metric measuring consumers’ opinions on the current economic environment rose to 66.8 from 64.8 in June, surpassing consensus estimates of 63.9.
- Index of Consumer Expectations: This metric measuring consumers’ outlook on future economic conditions increased slightly to 58.6 from 58.1, indicating moderate hope for upcoming months.
Expert Insights on Consumer Confidence
Joanne Hsu, Director of Consumer Surveys at the University of Michigan, stated: “It is unlikely that consumers will regain confidence in the economy unless they feel secure that inflation will not worsen, for example, if trade policy stabilizes in the foreseeable future.”
“Currently, interviews reveal few signs that other political events, including the recent passage of tax and spending legislation, have significantly impacted consumer confidence,” Hsu added.
Inflation Perceptions Among Consumers
On the other hand, consumers’ 12-month inflation expectations fell to 4.4% from 5.0% in June, while long-term expectations dropped to 3.6% in July from 4.0% the previous month.
“Both readings are the lowest since February 2025 but remain above December 2024 levels, indicating that consumers still perceive a substantial risk of future inflation increases,” Hsu commented.
Key Questions and Answers
- What is the Consumer Confidence Index? The Consumer Confidence Index measures how optimistic or pessimistic consumers are regarding the US economy’s trajectory. It is based on surveys conducted by the University of Michigan.
- Why is this July’s index significant? The index rose to 61.8, the highest in five months, indicating a slight improvement in consumer confidence despite ongoing inflation concerns.
- What do the Index of Current Conditions and Index of Consumer Expectations tell us?
- The Index of Current Conditions increased to 66.8, reflecting a more positive view of the current economic situation.
- The Index of Consumer Expectations rose slightly to 58.6, suggesting moderate optimism for future economic conditions.
- What do consumers expect regarding inflation? Although 12-month and long-term inflation expectations have decreased from June levels, they remain above December 2024 figures, indicating that consumers still anticipate a significant risk of future price increases.
