| Consensus | Consensus Range | Actual | Previous | |
| Index | 54.2 | 53.5 to 54.4 | 55.2 | 54.4 |
| Year-ahead Inflation Expectations | 4.2% | 4.2% to 4.3% | 4.2% | 4.2% |
| Index Change | 0.8 | 4.9 | ||
| Index % Change | 1.5% | 9.9% |
Highlights
Sentiment comes in at 55.2 in the July final, an unexpected upward revision from 54.4 in the July preliminary report and up 12 percent from 49.5 in the June final. The Econoday consensus looked for 54.2 in the July final.
One-year inflation expectations are unrevised from the July preliminary report at 4.2 percent in the July final and down from 4.6 percent in June. That remains way above the 3.4 percent figure in February, just before President Trump started the war with Iran. Mostly that appears to reflect the consumer response to the surge in gasoline prices. It's notable and odd that the July uptick in gasoline prices has not spurred a rebound in 1-year inflation expectations.
Five-year inflation inflation expectations are also unrevised at 3.3 percent from the preliminary report. That is unchanged from February, a decent signal of anchored inflation expectations, but the anchor is in place rather far above the 2 percent Federal Reserve target.
Market Consensus Before Announcement
Sentiment seen down marginally at 54.2 in the July final from 54.4 in the preliminary July report.
Definition
The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.
Description
The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.
This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.
Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.
