Michigan Consumer Sentiment Inches Up in August

The July Final Report came in at 51.5, up 1.5 (3.0%) from the June Final. Investing.com had forecast 52.5. Since its beginning in 1978, consumer sentiment is 35.6 percent below the average reading (arithmetic mean) and 34.8 percent below the geometric mean.

Surveys of Consumers chief economist, Richard Curtin, makes the following comments:

Consumer sentiment moved up very slightly this month to about 5 index points above the all-time low reached in June. All components of the expectations index improved this month, particularly among low and middle income consumers for whom inflation is particularly salient. The year-ahead economic outlook rose substantially to just above its average reading from the second quarter 2022, while the two other expectations index components remain at or below their second quarter averages. At the same time, high income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables. With continued declines in energy prices, the median expected year-ahead inflation rate fell to 5.0%, its lowest reading since February but still well above the 4.6% reading from a year ago. At 3.0%, median long run inflation expectations remained within the 2.9-3.1% range seen over the past year. Uncertainty over long run inflation receded a bit, with the interquartile range in expectations falling from 4.7 last month to 3.8 this month, remaining above the 3.3 range seen last August. Still, the share of consumers blaming inflation for eroding their living standards remained near 48%. [More...]

See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.