WASHINGTON (AP) — A surge in Democratic optimism about Vice President Kamala Harris’ prospects has pushed U.S. consumer sentiment up barely this month.
The University of Michigan’s consumer sentiment index rose to 67.8 from 66.4 in July. Americans’ expectations for the longer term rose, while their assessment of the present economic situation fell barely.
Sentiment rose amongst Democrats and political independents. Sentiment fell amongst Republicans. The poll found that 41 percent of consumers thought Harris was the higher candidate on the economy, while 38 percent selected Republican candidate Donald Trump. Before President Joe Biden dropped out of the presidential race and let Harris take the lead, Trump had a bonus on that issue.
The Michigan index has rebounded after bottoming out at 50 in June 2022, when inflation hit a four-decade high. But it continues to be well below healthy levels. Before COVID-19 hit the economy in early 2020 — triggering a recession followed by an unexpectedly strong recovery that sparked inflation — the Michigan index was frequently within the 90s and infrequently exceeded 100.
“Consumers overall are still quite depressed by historical standards, but sentiment is improving,” said Carl Weinberg, chief economist at High Frequency Economics.
Economists monitor Americans’ mood to find out whether or not they are within the mood to buy. This is vital because their spending accounts for about 70 percent of U.S. economic activity.
Americans have been grumpy since inflation struck greater than three years ago. With the presidential election in November approaching, many are blaming President Biden for the upper prices.
Despite their bad mood, American consumers have continued to spend anyway. This is essentially why the economy grew at a healthy annual rate of two.8 percent from April to June. They have continued to spend in the present quarter, too: The Commerce Department reported Thursday that retail sales rose 1 percent from June to July, the most important increase since January 2023, driven by strong sales at electronics stores, supermarkets and automotive dealerships.
The Federal Reserve responded to the resurgence in inflation by raising its benchmark rate of interest 11 times in 2022 and 2023, bringing it to a 23-year high. Inflation has cooled significantly since peaking at 9.1% in June 2022. Last month, it had fallen to 2.9%, approaching the Fed’s 2% goal.
The central bank is now widely expected to start cutting rates of interest at its next meeting in September.
