Consumer sentiment inched up in July, increasing for a second straight month. The Michigan Consumer Sentiment Index was up 1.8% (1.1 points) to 61.8 this month. This is the index's highest level since February but still reflects historically low levels of optimism. Consumer sentiment has fallen by 6.9% (4.6 points) compared to a year ago.
The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the U.S. with regards to the economy, personal finances, business conditions, and buying conditions, conducted by the University of Michigan. There are two reports released each month; a preliminary report released mid-month and a final report released at the end of the month.
Joanne Hsu, the director of surveys, made the following comments:
Consumer sentiment was little changed from June, inching up about one index point to 61.8. While sentiment reached its highest value in five months, it remains a substantial 16% below December 2024 and is well below its historical average. Short-run business conditions improved about 8%, whereas expected personal finances fell back about 4%. Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future. At this time, the interviews reveal little evidence that other policy developments, including the recent passage of the tax and spending bill, moved the needle much on consumer sentiment.
See the chart below for a long-term perspective on this widely watched indicator. We've highlighted the index's value at the start of each recession and included a callout to the most recent 12 months. At 61.8, the current level is below the index's value at the start of all six recessions since its inception.
To put today’s report in historical context, consumer sentiment is currently 26.8% below its average reading of 84.4 (arithmetic mean) and 25.8% below its geometric mean of 83.3, based on data dating back to 1978. The current index level is at the 6th percentile of the 571 monthly data points in this series.
This indicator is somewhat volatile, with an average monthly change of 3.1 points. The latest data shows a 1.1-point change from the previous month. To visualize the volatility, here’s a chart with monthly data and a three-month moving average. The bottom half of the chart includes real GDP, which allows us to evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Each month, the survey results highlight sentiment within each political party. To provide additional context, I’ve included a chart that shows the presidencies over our timeframe. As you can see, sentiment has fluctuated both positively and negatively under both Republican and Democratic administrations.
Michigan Consumer Sentiment Index: Components
The Michigan Consumer Sentiment Index consists of two sub-indexes: the Current Economic Conditions Index (CECI) and the Consumer Expectations Index (CEI). The CECI reflects consumers' views of their current financial situation and the overall economy, while the CEI gauges their outlook for the future.
In July, the CECI rose to 66.8, its second consecutive monthly increase and the highest level since January. This represents an 3.1% increase from the previous month and a 6.5% rise from a year ago. This reading was above the forecast of 63.9.
Meanwhile, the CEI rose to 58.6, its third consecutive monthly increase and the highest level since February. This represents a 0.9% increase from the prior month and a 14.8% decline from one year ago. This reading was above the forecast of 55.0.
Michigan Consumer Sentiment Index: Inflation Expectations
Year-ahead inflation expectations fell for a second straight month, plunging from 5.0% last month to 4.4% this month. Long-run inflation expectations receded for the third consecutive month, falling back from 4.0% in June to 3.6% in July. Both readings are the lowest since February 2025 but remain above December 2024, indicating that consumers still perceive substantial risk that inflation will increase in the future.
Other Sentiment Indicators
For an additional perspective on consumer attitudes, see the most recent Conference Board's Consumer Confidence Index. Both indexes gauge consumer attitudes toward the current and future strength of the economy. However, the Consumer Confidence Index is more influenced by employment and labor market conditions while the Michigan Sentiment Index is more focused on household finances and the impact of inflation.
The Conference Board index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan index.
And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB business optimism Index (monthly update here).
The next update to this report will be published on August 1st.
ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).
Read more updates by Jen Nash
