The numbers: The second and final reading of the University of Michigan’s consumer sentiment index fell to 81.2 in July from a reading of 85.5 in June, though it exceeded the initial July figure of 80.8.

Economists expected a reading of 80.5, according to a Wall Street Journal survey.

What happened: Consumers remained guarded about the general health of the economy, with near-term inflation remaining at top of mind. Expectations for inflation over the next year rose to 4.7% from 4.2% in June and remain higher than they’ve been for more than a decade.

Nevertheless, Americans still believe inflation over the next five years will remain a tame 2.8%, down from May’s 12-month high of 3.0%.

A sub-index that measures how consumers feel about the economy right now fell to 84.5 in July’s final reading from from 88.6 in June.

The index that measures expectations for the next six months slipped to 79 from 83.5 last month.

Big Picture: Consumer prices in June rose by the largest amount since 2008, the government reported earlier in July, so it’s no surprise that inflation remains a serious concern for American consumers.

That said accompanying wage gains and government stimulus payments have boosted consumer’s ability to afford price increases and there remains little evidence that consumers are hoarding products in anticipation of future price increases.

What UMich said: “The improved finances of consumers have greatly reduced consumers’ resistance to price increases,” said Richard Curtin, the chief economist of the Surveys of Consumers. “While firms have reacted to their own supply and labor shortages with a greater readiness to increase prices as well as wages, consumers and firms currently justify their actions as temporary adjustments due to the pandemic.”

“This reaction by consumers is unique, and quite different from the inflationary psychology of the 1970s,” he added. “In that earlier era, the booms were driven by the willingness of consumers to advance their purchases in an attempt to avoid future price hikes, now the coming boom will be due to income and job gains that make price increases easier to manage.”

Market reaction: U.S. stocks held to slight losses following the report, with the Dow Jones Industrial Average

edging 0.1% lower, the S&P 500

down 0.4% and the Nasdaq

losing 0.6%

What's your reaction?

In Love
Not Sure

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *

More in:Latest News