Americans were slightly less optimistic about the economy this month, following two months of growing optimism.
Consumer sentiment, tracked by the University of Michigan, fell from the previous month to 71.2 in August, down from 71.6 in July. Sentiment remained on a high throughout the summer, largely due to Slow inflationAnd that’s well above the record low reached at this time last year.
“Overall, consumers perceived few material differences in the economic environment from last month, but they saw substantial improvements from three months ago,” University of Michigan study director Joan Hsu said in a release.
Expectations for inflation rates in the previous year fell to 3.3% from the previous estimate of 3.4%.
Gas prices, the most visible indicators of inflation for consumers, have risen in recent weeks, which may weigh sentiments in the future. The consumer price index rose 3.2% in July, up from June’s 3% annual increase, although underlying price pressures continued to ease.
“The University of Michigan’s consumer confidence index fell in August, but is likely to decline further due to recent increases in retail gasoline prices,” Oxford Economics chief U.S. economist Ryan Sweet wrote in an analyst note. “Rising gasoline prices have economic costs, and they can escalate quickly.”
If inflation continues to cool in the coming months, it will bode well for consumer sentiment. As recent research from the Federal Reserve Bank of San Francisco argues Shelter inflation is poised to ease significantly, reaching 0% in 2024 and then turning negative in the second half of the year. However, consumers are facing student loan payments again later this year, and that will weigh on household budgets.